Question

1. You borrowed $10,000 from a friend and promised to give his money back in 5 years. At the end of five years, you gave him $10,000. Did you return your friend his money? Did you do any injustice? Is it right?

Answer 1

Ans : present value of money borrowed = $ 10,000

repayment of money at the end of 5 years = $ 10,000

during the time , value of money changes at some interest rate. the money if not lent by friend would have invested in some bonds or somewhere at no risk and would have earned more than $ 10,000 . It means the money would be more than 10,000 at the end of 5 years.

your friend lost interest money from 10,000 by investing somewhere which is oppurtunity cost. you would have paid some interest rate at least some government bonds rate. which would be justifiable.