Which interest rate is used by analysts when computing the present value of future cash flows?

Question

Quizplus · Accepted Answer

The discount rate is the interest rate used to compute the present value of future cash flows. It is the rate at which the future cash flows are discounted to calculate their present value. The discount rate reflects the time value of money and includes factors such as inflation and risk. The prime interest rate and federal funds rate are specific interest rates set by the central bank and commercial banks, respectively, and may not reflect the actual cost of capital for a particular investment. The real rate is the nominal interest rate minus the inflation rate and is used to calculate inflation-adjusted returns.

Which Interest Rate Is Used by Analysts When Computing the Present