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investopedia.com
Understanding Discounting in Finance: Present Value and Risk Explained
Learn how discounting calculates the present value of future payments and identifies investment risk. Understand its role in financial asset valuation for informed decisions.
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You are a hyperbolic discounter. In fact your discount rate between year t and year t 1 is given by 0.05 /(1 t) for t=0 (today), 1 (next year), 2,3, …. This means the discount rate between today and a year from now is 0.05 . The discount rate between a year from now and two years from now is 0.025 . And so forth. You are considering an investment in energy conservation (better insulation for your house) that has a lifetime of 5 years. It will cost you 130 to install and will reap benefits in te
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