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

Question

Quizplus · Accepted Answer

The discount factor is calculated as 1/(1+r), where r is the nominal interest rate. Since r is always positive, the denominator (1+r) is always greater than 1. Therefore, the discount factor is always less than 1, which corresponds to option D.

Because the Nominal Interest Rate Is Always Positive,the Discount Factor