Answer:
Assume the appropriate discount rate is 2% per period. The discount factor for a cash flow 10 periods from today is closest to:
0.820.
Explanation:
The Discount Factor assigns some time-based weights to cash flows in order to determine the present value of future cash flows. It is calculated by adding the discount rate to one, which is then raised to the negative power of a number of periods. This implies that the use of the discount factor enables one to determine the present value of future cash flows, thereby reducing the future value to the present value. The discount factor can easily be found using the present value table.
