Discounting Calculates the __________ Value of an Amount to Be

question 58

Multiple Choice

Discounting calculates the __________ value of an amount to be received.

• A)future
• B)compounded
• C)present
• D)book

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Definitions:

Present Value

The now value of a sum of money to be received in the future or a series of financial inflows, accounting for a specific return rate.

Simple Interest

Simple interest is a method of calculating the interest charge on a loan or investment based on the original principal amount and not on accumulated interest.

Discount

A reduction applied to the normal cost of goods or services, or in finance, the process of determining the present value of future cash flows by applying a discount rate.

Compound Interest

Interest that accrues on the principal amount as well as on the accrued interest from earlier periods, for either a deposit or a loan.