Question

Steve just computed the present value of a $10,000 bonus he will receive next year. The interest rate he used in his computation is referred to as the:

Answer 1

Answer:

Discount rate

Explanation:

As we know that

The current value of the money we called the present worth and the value that arises in the future we called it the future worth.

For computing the present value of cash flows we simply multiplied the initial investment and the cash outflows with the discount rate so that the present value could come

The discount rate could come by referring the PVIFA factor table or PVF factor table

Hence, the interest rate i.e used for the computation is known as discount rate