Discounting involves dividing next-period income by ________.
A)one plus the real rate of interest
B)the nominal rate of interest
C)current income
D)the real rate of interest

Question

Quizplus · Accepted Answer

Discounting involves adjusting future cash flows to their present value, by dividing them by one plus the real rate of interest. This takes into account the time value of money and the opportunity cost of waiting for future income.

Discounting Involves Dividing Next-Period Income by ________