Question

3. Discounting is the process of moving a present value sum to the future value and compounding is the process of moving a future value sum to the present value. A. True B. False

Answer 1

False.

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

while

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

Hence discounting is moving future value sum to present value at a specified interest rate;

while compounding is moving present value to future value at a specified interest rate.