Preferable Discount Rate



Preferable Discount Rate

Introduction

The concept of discount rate or interest rate is utilized by financial Institutions and other eligible business that are allowed to issue debt items or borrow funds from banks on a certain discount rate decided and controlled by federal reserve bank. The Discount rat may vary depending on the risk and return profile of a particular credit item. It is mainly used under the concept of time value of money in discounting cash flows in order to determine the present value of expected cash flows in some future time (Investopedia, n.d.).

Discussion

The concept of time value ...