Economics Time Value Of Money Questions Medium
The formula for calculating the discounting factor is:
Discounting Factor = 1 / (1 + r)^n
Where:
- "r" represents the discount rate or interest rate
- "n" represents the number of periods or years
The discounting factor is used to determine the present value of future cash flows by discounting them back to their present value. It reflects the time value of money, as it accounts for the fact that money received in the future is worth less than the same amount received today.