Discounting rate
Compounding rate
Inflation rate
Deflation rate
Answer is Right!
Answer is Wrong!
The correct answer is A. Discounting rate.
Present value is the current worth of a future sum of money, discounted to reflect the time value of money. It is calculated by taking the future value and dividing it by a discount rate. The discount rate is the rate of return that an investor would expect to earn on an investment of similar risk.
The other options are incorrect because they do not take into account the time value of money.
- Compounding rate is the rate at which interest is earned on interest. It is used to calculate the future value of an investment.
- Inflation rate is the rate at which prices for goods and services are rising. It is used to adjust the present value of an investment for inflation.
- Deflation rate is the rate at which prices for goods and services are falling. It is used to adjust the present value of an investment for deflation.