Question

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 much would you have in one year if you deposited the $49 instead? round to nearest cent

b. How much money could you borrow today if you pay the bank $52 in one year? round to nearest cent

c. Should you loan the money to your friend or deposit it in the bank? From a financial perspective, you should lend the money to your friend , as it will result in more money for you at the end of the year.

Answer #1

a), If you invest $49 in bank instead.

Future Value in 1 year = Invested amount*(1+Interest rate)

Future Value in 1 year = $49*(1+0.061)

**Future Value in 1 year = $51.99**

b). If you pay bank $52 in one year

Borrowed amount = Repayment amount/(1+Interest rate)

Borrowed amount = $52/(1+0.061)

**Borrowed amount toady = $49.01**

c). I should lend the money to the friend as he will pay $52 in one year while bank will pay $51.99.

Thus, lending money to friend results in higher value at year end.

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A friend asks to borrow $49 from you and in return will pay you
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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
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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 $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
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in one year?
c. Should you loan the money to your friend or
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How much money could you borrow today if you pay the bank $49
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Compound Interest
You borrow 1,000,000 for one year from a friend at an interest rate
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