The interest rate which is used in the determination of the present value is called the:
A) compounding rate.
B) discount rate.
C) future value rate.
D) internal rate of return.
E) the leverage rate.

Question

Quizplus · Accepted Answer

The discount rate is the interest rate that is used to determine the present value of future cash flows. It is called the discount rate because it "discounts" the future cash flows to their present value. The compounding rate is used to calculate the future value of investments. The future value rate is not a commonly used term. The internal rate of return (IRR) is a method used to calculate the rate of return on an investment. The leverage rate is not directly related to the determination of present value.

The Interest Rate Which Is Used in the Determination of the Present