What is the process of converting future sums of money into their present value called?

The process of converting future sums of money into their present value is known as discounting. This concept relies on the time value of money, which asserts that a specific amount of money today is worth more than the same amount in the future due to its potential earning capacity.

When discounting, a particular rate—often referred to as the discount rate—is applied to determine how much future cash flows are worth today. By using this approach, one can assess the current value of future cash flows, allowing for more accurate financial decision-making and investment analysis.

The other options relate to financial concepts but do not accurately define the process in question. Future Value refers to the amount an investment is expected to grow to over time when compounded at a specific interest rate. Present Value would typically refer to the result of discounting future sums but does not describe the action of performing that conversion. Interest Rate is a factor used in calculating discounting and future value but does not itself define the process.