alleryStart learning →Working out today's worth of a house price six years from now is an example of:
ACompounding
BAmortising
CDepreciating
DDiscounting
Answer & Solution
Correct answer: D. Discounting
1. The direction of the calculation names the process.
2. Compounding carries a present amount forward to a future value.
3. Working back from a future amount to today reverses that.
4. This discounting process is the exact opposite of compounding interest.
5. So finding today's worth of a future price is discounting.
_Source: OpenStax Principles of Finance (CC BY 4.0), Ch 7 'Time Value of Money I: Single Payment Value'_
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