General Investing
  -General information about
  getting started.
Stocks
  -How investing in the stock
  market works
Bonds
  -How bond investing works
Mutual Funds
  -How mutual funds work
Economics
  -A basic intro to the economy
Advanced Investing Topics
  -This section covers topics
   like futures and options

Discount Rate
Term category: Finance/Accounting
In 10 words or less:  A rate used to determine the present value of future cash flows.

Definition: In order to determine the value of future cash flows, they need to be "discounted" back to the present to account for the time value of money, inflation, and other risks.  The discount rate is used to do this.

Advice: A common discount rate used is the weighted average cost of capital (WACC).  Here's an example of a discount:

Let's say you were going to receive $1,100 in one year from now.  With a 10% discount rate, what is this worth today?

Answer: $1,000      [$1,100/(1 + 10%)]

 

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