Glossary term
Discount rate
A discount rate is the rate used to translate a future cash flow or future value into a present value.
Plain meaning
What discount rate means
A discount rate is a timing assumption. It answers the question: if money is expected later, what rate should be used to express that future amount in today's dollars?
In present value calculations, a higher discount rate usually produces a lower present value. A lower discount rate usually produces a higher present value.
Formula role
How OpenBook uses it
In OpenBook calculators, the discount rate is usually an input assumption for present value, net present value, discounted payback, and lump-sum comparison calculations. It is applied with the time period and cash-flow timing convention to discount future amounts back to the calculation date.
The discount rate is not automatically the same as an expected investment return, inflation rate, borrowing rate, or guaranteed rate. OpenBook calculators state which interpretation is being used where the term appears.
Common confusion
Why the rate matters
Small changes in the discount rate can materially change a present value result, especially over long periods. For that reason, OpenBook calculators treat the discount rate as a visible assumption rather than hiding it inside the formula.