A discount rate is a percentage used to calculate the present value of a future sum of money. For instance, if you are expecting to receive $1,000 in 5 years, and the discount rate is 5%, the present value of that $1,000 is $821.93.
Discount rates are essential for a variety of financial calculations, including the valuation of bonds, stocks, and real estate. The key historical development in the theory of discount rates was the development of the Fisher equation in the early 20th century.