Unformatted text preview: The rate of discount is calculated as the extent of difference in valuation. Normally the rate of interest also acts as a rate of discount. In the above example the amount of $1100 an year ahead is equivalent to $1000 today. This way, the present value of the future income has been discounted by 10 percent....
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 Fall '10
 
 $1000, 10 percent, $1100, present valuation

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