Discount rate

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Annuity dueAn annuity whose payments fall at the beginning of each period rather than the end, which makes it worth more than an otherwise identical ordinary annuity.
• CAGRThe single smoothed annual rate at which a starting value would have to grow, compounding each year, to reach the ending value over a given period.
• Future valueWhat a sum of money invested today will be worth at a future date once returns have been earned and reinvested — the compounding half of the time value of money.
• PMT functionThe spreadsheet function that converts a target corpus into the fixed periodic saving needed to reach it — the arithmetic behind every "how much should I invest a month" answer.
• Time value of moneyThe principle that the same sum of money is worth different amounts at different points on a timeline, because money held today can be invested and because inflation erodes what it will buy.