Asked by Anthony Rabbit on May 08, 2024
Verified
The rate used to find the present value of a future payment is called the:
A) Simple rate.
B) Discount rate.
C) Compound rate.
D) Future value rate.
E) Loan rate.
Discount Rate
Within DCF analysis, it's the rate employed to compute the present economic value of expected future cash inflows.
Present Value
The current value of a future sum of money or stream of cash flows, discounted at a specific interest rate.
Compound Rate
The rate at which interest on an investment or loan is calculated on both the initial principal and the accumulated interest from previous periods.
- Understand the importance of the discount rate in calculating the present value of future cash flows.
Verified Answer
SG
Sharleen GarzaMay 15, 2024
Final Answer :
B
Explanation :
The discount rate is the interest rate used to determine the present value of future cash flows. It reflects the time value of money, showing how much current money is worth in the future or vice versa.
Learning Objectives
- Understand the importance of the discount rate in calculating the present value of future cash flows.