Discounting is the process of figuring out how much money you need to invest now to have a certain amount of money in the future. It’s the opposite of compounding, through which you figure out how much a certain amount invested now will be worth in the future. Let’s say you want to have $100 dollars in 5 years. Discounting would tell you how much money you’d need to invest now to reach that goal.

Tags: compounding, discounting