The method of converting a future dollar amount into its present dollar value by removing the time value of money is called
A)discounting
B)compounding
C)amortizing
D)interpolation

Question

Quizplus · Accepted Answer

Discounting is the method used to convert a future dollar amount into its present value by considering the time value of money. It involves using a discount rate to calculate what the present value of the future cash flow would be. Compounding is the opposite of discounting, and it involves calculating the future value of a present amount by considering the time value of money. Amortizing is the process of gradually paying off a debt or asset over time through regular payments. Interpolation is a statistical method used to estimate values between two known data points. None of these options are directly related to converting a future dollar amount into its present value.

The Method of Converting a Future Dollar Amount into Its