Discounting

The process of multiplying a payment by a discount factor is referred to as discounting. Discounting is used to find the present value of payments or payment streams.

The discount factor for a payment in n years is 1 / (1 + (interest rate as a %) / 100)n (based on annual interest terms and compounding interest).

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Expert Benjamin Manz
Benjamin Manz is CEO of moneyland.ch and an independent expert on banking and finance.