Question: 1. What is the discount factor equal to? Please explain. 2. Do discount factors always have to be less than 1? If so, why? 3.

1. What is the discount factor equal to? Please explain.

2. Do discount factors always have to be less than 1? If so, why?

3. If you believe that interest rates will dramatically increase, should you select a loan that is payable upon maturity or select a loan that requires fixed annual payments?

Please include references.

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