Asked by Summer Bourbon on Jun 09, 2024
Verified
The interest rate used to calculate the present value of future cash flows is called the ____________ rate.
A) Free interest.
B) Annual interest.
C) Compound interest.
D) Simple interest.
E) Discount.
Discount Rate
The interest rate used to discount future cash flows to their present value, often reflecting the cost of capital or the risk of the investment.
Present Value
The present evaluation of a future cash sum or series of cash receipts, factoring in a certain rate of return for discounting.
Interest Rate
The sum a lender charges a borrower to use assets, conveyed as a percentage of the principal's amount.
- Appreciate the value of the discount rate in ascertaining the present value of impending financial streams.
Verified Answer
MZ
Michael ZalewskiJun 15, 2024
Final Answer :
E
Explanation :
The interest rate used to calculate the present value of future cash flows is called the discount rate. It reflects the time value of money and is used to determine the current worth of cash to be received in the future.
Learning Objectives
- Appreciate the value of the discount rate in ascertaining the present value of impending financial streams.