Discount Formula

Discounting is a financial mechanism in which a debtor obtains the right to delay payments to a creditor, for a defined period of time, in exchange for a charge or fee, Essentially, the party that owes money in the present purchases the right to delay the payment until some future date. The discount, or charge, is the difference (expressed as a difference in the same units (absolute) or in percentage terms (relative), or as a ratio) between the original amount owed in the present and the amount that has to be paid in the future to settle the debt.

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