Discounted cash flow
What do you call the process of changing present values into future ones
Present and future values and the concept of indifference
$100 dollars today, if the interest rate is 5%, is the same as $127.63 paid five years from today. If you could buy that future security for less than $100, it’s a deal. Because what you’d get for putting your $100 into a risk free CD at 5% is only the $127.63. In other words, if you buy the security at less than $100 and still receive the same $127.63, you got a deal.
What’s the reverse of compounding?
Discounting, in other words turning future values into present ones.