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If the discount rate is 10% , how do we calculate the discount rate of the next 5 years????
Thanks in Advance
With the help of discount rate we present value of money.
for example if we have 10% discount rate and we want to calculate present of 1000$ in two year.
solution:- 1000*(1+0.10)^(-3) =751.315
10% =0.10
present value of 1000 in 4years?
solution:- 1000*(1+0.10)^(-4) =683.01
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In calculating Discount Factor,the below formular can be applied
P*1/(1+r)^n where r=rate, n=number of years and P=principal.So for example if you want to find the value $500 in 3years time,then it will be =500*1/(1+0.1)^3=
500*0.75=$375.66
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