If the One-Year Discount Factor Is 0

question 8

Multiple Choice

If the one-year discount factor is 0.90, what is the present value of $120 expected one year from today?

• A)$100
• B)$96
• C)$108
• D)$133

---

Definitions:

Transaction Costs

The expenses incurred when buying or selling securities, including broker fees and taxes.

Futures Markets

Competitive marketplaces where parties can trade standardized futures contracts; that is, legal agreements to buy or sell something at a predetermined price at a specified time in the future.

Leverage

The use of borrowed funds or financial instruments to increase the potential return of an investment, which can also magnify the potential for loss.