Differentiate between compound interest and discounting

Question

Differentiate between compound interest and discounting.

Answer 1

A) Compound interest comes in the picture when interest is earned on interest as well as on the original principal of an investment whereas Discounting is the opposite of compounding.
B)  Compound interest makes the value of an initial amount to increase at an increasing rate.  Discounting makes the current value of a future amount to reduce at an increasing rate.