If the one-year discount factor is equal to 0.90909, the interest must be equal to
A)9.5%.
B)5.0%.
C)10.0%.
D)9.1%.

Name: If the one-year discount factor is equal to 0.90909, the interest must be equal to A)9.5%. B)5.0%. C)10.0%. D)9.1%.
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Question

Quizplus · Accepted Answer

The discount factor is calculated as 1 / (1 + r), where r is the interest rate. If the discount factor is 0.90909, solving for r gives us an interest rate of 10.0%.

If the One-Year Discount Factor Is Equal to 0