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10 April, 04:56

If the one-year discount factor is 0.8333, what is the discount rate (interest rate) per year?

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  1. 10 April, 05:15
    0
    20%

    Explanation:

    The computation of the discount rate per year is shown below:

    As we know that

    Discount factor = 1 : (1 + Interest rate) ^number of years

    0.8333 = 1 : (1 + Interest rate) ^1

    1 + Interest rate = 1 : 0.8333

    Interest rate = 1.20 - 1

    Interest rate = 0.20 or 20%

    Hence, the interest rate is 20% by applying the discount factor formula which is shown above
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