The process of discounting or finding the present value of a cash flow to be received in the future is really the reverse of compounding.

Question

Quizplus · Accepted Answer

Discounting involves finding the present value of a future cash flow by calculating the amount of money that needs to be invested today in order to yield that future cash flow. This is essentially the reverse of compounding, which involves calculating the future value of an investment based on the present value and the interest rate.

The Process of Discounting or Finding the Present Value of a Cash