In finance, a “discount rate” is an interest rate used to determine the present value of a future sum of money, or the future value of a present sum of money. For example, a discount rate of 10% means that $100 today will be worth $90 in one year, or $110 in one year if the discount rate is -10%.
The discount rate is used to evaluate the present value of a future cash flow, which is useful in capital budgeting, project evaluation, bond pricing, and other financial calculations. The discount rate can also be used to compare the value of different investments, or to calculate the internal rate of return (IRR) of an investment.