If the annual interest rate is 12 percent, what is the two-year discount factor?
A)0.7972
B)0.8929
C)1.2544
D)0.8065

Question

Quizplus · Accepted Answer

The two-year discount factor can be calculated using the formula 1 / (1 + r)^n, where r is the annual interest rate (expressed as a decimal) and n is the number of years. Here, r = 0.12 and n = 2, so the discount factor = 1 / (1 + 0.12)^2 = 1 / (1.12)^2 = 1 / 1.2544 = 0.7972.

If the Annual Interest Rate Is 12 Percent, What Is