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

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

Quizplus · Accepted Answer

The discount factor is calculated as 1/(1 + interest rate). If the discount factor is 0.90909, then 1/(1 + interest rate) = 0.90909. Solving for the interest rate gives approximately 10.0%.

If the One-Year Discount Factor Is Equal to 0