Daunt means to frighten, dishearten or otherwise discourage someone to induce a loss of will for going on.

Ex – No threat could daunt him in his quest for finding the truth behind the incident.

 

Dismay points to hopeless discouragement in the face of obstacles and paralysing fear in the face of a threat.

Ex – Stevenson’s opponents were often dismayed by his size when they faced him in the boxing ring.

 

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