Final answer:
The yearly discount rate equivalent to a discount factor of 0.9009 is approximately 9.91%, which is determined using the formula (1 - Discount Factor) / Discount Factor.
Step-by-step explanation:
If you have a discount factor of 0.9009, to calculate the discount rate we use the formula:
Discount Rate = (1 − Discount Factor) / Discount Factor
Plugging into the formula:
Discount Rate = (1 − 0.9009) / 0.9009 = 0.0991 or 9.91%
This means the yearly discount rate equivalant to the given discount factor of 0.9009 is approximately 9.91%. Understanding the discount rate is crucial in the context of finance, as it affects the valuation of bonds, cash flows, and other investments over time.