Calculate the discount factor for $1.00 received at the end of one year, assuming a 12% discount rate.

Name: Calculate the discount factor for $1.00 received at the end of one year, assuming a 12% discount rate.
Brand: Quizplus
Rating: 5.0 (50 reviews)

Question

Quizplus · Accepted Answer

The discount factor is calculated using the formula 1 / (1 + r)^n, where r is the discount rate and n is the number of periods. Here, r = 12% or 0.12, and n = 1. So, the discount factor = 1 / (1 + 0.12)^1 = 1 / 1.12 = 0.8929, which rounds to 0.89.

Calculate the Discount Factor for $1