Question

Compound Interest

Answer #1

**SOLUTION:-**

**CASE 1) WHEN
LOAN TAKING FROM THE FRIEND :-**

**A = P ( 1 + r /n ) ^{n*t}**

**Where A = Total amount.**

**P = Principal = 1,000,000**

**r = 1% = 0.01**

**n = number of times compounded per year =
12**

**A= 1,000,000 (1 + 0.01 / 12) ^{12*1}**

**A = 1,000,000 (1.000833) ^{12}**

**A = 1,000,000 * 1.010042**

**A = 1010042**

**Interest = A - P**

**Interest = 1010042 - 1,000,000**

**Interest = 10042**

**CASE:-2) WHEN
LOAN TAKEN FROM BANK**

**A = P (1+ r / n) ^{n*t}**

**Where P = 1,000,000**

**r = 13% = 0.13**

**n = 1**

**t = 1 year**

**A = 1,000,000 (1 + 0.13 / 1) ^{1*1}**

**A = 1,000,000 (1.13) ^{1}**

**A = 1,000,000 * 1.13**

**A = 1130000**

**Interest = A - P**

**Interest = 1130000 - 1,000,000**

**Interest = 130000**

**Thus, we save more money
when loan is taken from friend and the amount saved = (130000 -
10042) = 119958**

A friend asks to borrow $49 from you and in return will pay you
$52 in one year. If your bank is offering a. 6.1% interest rate on
deposits and loans: a. How much would you have in one year if you
deposited the $49 instead? b. How much money could you borrow
today if you pay the bank $52 in one year? c. Should you loan the
money to your friend or deposit it in the bank?
a. How...

a friend asks to borrow $51 from you and in return will pay you
$54
in one year. If your bank is offering a 6.4% interest rate on
deposits and loans:
a. How much would you have in one year if you deposited the $51
instead?
b. How much money could you borrow today if you pay the bank $54
in one year?
c. Should you loan the money to your friend or deposit it in
the bank?

A friend asks to borrow $49 from you and in return will pay you
$52 in one year. If your bank is offering a 6.5% interest rate on
deposits and loans:
A. How much would you have in one year if you deposited the $49
instead?
B. How much money could you borrow today if you pay the bank $52
in one year?
C. Should you loan the money to your friend or deposit it in the
bank?

A friend asks to borrow $48 from you and in return will pay you
$51 in one year. If your bank is offering a 6.4%
interest rate on deposits and loans:
a. How much would you have in one year if you deposited the $48
instead?
b. How much money could you borrow today if you pay the bank $51
in one year?
c. Should you loan the money to your friend or deposit it in
the bank?

A friend asks to borrow
$ 47$47
from you and in return will pay you
$ 50$50
in one year. If your bank is offering a
5.9 %5.9%
interest rate on deposits and loans:
a. How much would you have in one year if you
deposited the
$ 47$47
instead?
b. How much money could you borrow today if you
pay the bank
$ 50$50
in one year?
c. Should you loan the money to your friend or
deposit it...

A friend asks to borrow $46 from you, and in return will pay
you $49 in 1 year. If your bank is offering a 6.3% interest rate on
deposits and loans
How much money could you borrow today if you pay the bank $49
in one year?

Your friend just got a five-year car loan for $40,000 with 6%
interest rate (APR) and monthly
payments. You explained to her that 6% is too high, and she could
have saved a lot of money if she
negotiated with the bank and got 3% instead. How much money would
your friend have saved every
month if the rate was 3% instead of 6%?

-You have offered your friend a $15,000 loan with 7% simple
interest per year for 8 years. How much interest will you earn on
the loan?
-You are earning interest on money in your bank account at a
rate of 4% compounded annually. If you deposit $7,000 in the
account for 7 years, how much ineterst will you earn?
-You need $21000 to purchase a really sweet Honda Civic. You
negotiate a loan with the bank of Mom and Pop...

You borrow $50,000 from a bank at the rate of 8 percent per
year. You are planning to pay off this loan in 5 years in equal
quarterly payments. How much would be each payment?

Your friend wants to borrow money from you. He proposes to repay
his debt in 5 monthly installments of $200, starting from month 4
(i.e., the first payment will occur at the end of month 4). If the
monthly interest rate on your savings account is 1%, how much would
you lend your friend at most? Round your result to the nearest
cent, and do not use a $ sign (i.e., if the result is $1012.4671,
enter it as 1012.47).

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