If zero rates (also known as discount rates) are positive for any maturity, the discount function $d ( t )$ , which gives the present value of a dollar receivable at time $t$ in the future,
A) Must be between 0 and 1
B) Must be greater than 0 and can be greater than 1
C) Can be a negative number
D) is usually 0.99

Question

Quizplus · Accepted Answer

The discount function $d(t)$ reflects the present value of a dollar receivable at time $t$ in the future. If zero rates are positive, it means that the future value is being discounted to present value, which will always result in a number between 0 and 1, indicating a value less than the future value due to the positive time value of money.

If Zero Rates (Also Known as Discount Rates) Are Positive d(t)d ( t )d(t)

If Zero Rates (Also Known as Discount Rates) Are Positive $d ( t )$