Discount rate is the percentage used to calculate the present value of a future cash flow. It reflects both the time value of money and the risk of the cash flow not materializing. Higher risk warrants a higher discount rate. The Federal Reserve also uses 'discount rate' for the rate it charges banks for short-term loans. In personal finance, the relevant concept is your personal discount rate — the return you'd otherwise earn on the money. When deciding whether to take a lump sum versus payments, use your expected investment return as the discount rate to compare the offers on equal footing.
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Discount Rate
August 22, 2026 · Aditya Gupta
Personal Finance
Related terms
1099 Form
Form 1099 is a family of IRS forms reporting various types of non-W-2 income. 1099-NEC reports nonemployee compensation…
529 Plan
A 529 plan is a tax-advantaged education savings account. Contributions grow tax-free; withdrawals for qualified education expenses (tuition,…
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