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A discount rate is an interest rate used to determine the present value of future cash flows.
One aspect of valuing a security is estimating the present value of future cash flows. This is done in discounted cash flow (DCF) analysis. For example, $100 received next year is generally worth less than $100 received today. The discount rate quantifies exactly how much less. The larger the discount rate, the smaller the present value of future cash flows.
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