alleryStart learning →Discounting is described as the exact opposite of which process?
AIssuing a new bond
BCompounding interest
CRecording depreciation
DPaying a dividend
Answer & Solution
Correct answer: B. Compounding interest
1. Present value and future value run in opposite directions.
2. Compounding carries a present amount forward to a future value.
3. Discounting works back from a future amount to today.
4. This discounting process is the exact opposite of compounding interest.
_Source: OpenStax Principles of Finance (CC BY 4.0), Ch 7 'Time Value of Money I: Single Payment Value'_
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