Question

You plan to borrow money from your grandmother to start a new chocolate candy business. You agree to make one payment of $100,000 at the end of 6 years and negotiate an interest rate of 7%. Your grandmother has offered to reduce the interest rate if you will pay her the $100,000 in 5 years (instead of 6 years). Assuming your grandmother will lend you the present value of the final payment, will the amount that she lends you increase or decrease if you agree to pay in 5 years in exchange for a lower interest rate.

A)The amount that she lends you will increase

B)The amount that she lends you will decrease

C)It depends on whether the interest rate changes enough to outweigh the shorter period before you repay your grandmother

**Please also explain why you choose the
answer**

Answer #1

Feedback is welcomed.

suppose you want to borrow some money for two years. You can
repay the loan with single payment of 100000 in two year's time.
the lending institution determines that there is a 6% chance that
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Your friend wants to borrow money from you. He proposes to repay
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nearest cent, and do not use a $ sign (i.e., if the result is
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