In the SULT parameter transformations, how is d treated?

• A. d is treated like i; it becomes 2d + d^2
• B. d is treated like delta; it becomes 2delta + delta^2
• C. d remains unchanged
• D. d is replaced by i; it becomes d + i

Answer: (A)

In SULT parameter transformations, the discount rate d is treated the same way as the interest rate i when forming compound factors. This means we substitute i with d in expressions that compute accumulated value.

For two periods, the accumulated value factor with i is (1+i)^2 − 1. Replacing i with d gives (1+d)^2 − 1, which expands to 1 + 2d + d^2 − 1 = 2d + d^2. So the transformed value is 2d + d^2.