Question

Assume the appropriate discount rate is 2% per period. The discount factor for a cash flow 10 periods from today is closest to:

Answer 1

0.8203

Step-by-step explanation:

Given that :

Using the discount factor formula :

1 / (1 + r)^n

r = discount rate = 2% = 0.02

n = number of periods = 10

1 / (1 + 0.02)^10

1 / (1.02)^10

1 / 1.21899441999475713024

= 0.8203482

= 0.8203