Because the nominal interest rate is always positive, the discount factor is always:
A) zero.
B) one.
C) negative.
D) greater than one.
E) less than one.

Question

Quizplus · Accepted Answer

The discount factor is calculated as 1/(1+ nominal interest rate). Since the nominal interest rate is always positive, the denominator is greater than 1, which means the discount factor is always less than 1. Therefore, the correct answer is E.

Because the Nominal Interest Rate Is Always Positive, the Discount