A friend asks to borrow $55 from you and in return will pay you $58 in one

Question:

A friend asks to borrow $55 from you and in return will pay you $58 in one year. If your bank is offering a 6% interest rate on deposits and loans:

a. How much would you have in one year if you deposited the $55 instead?

b. How much money could you borrow today if you pay the bank $58 in one year?

c. Should you loan the money to your friend or deposit it in the bank?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Fundamentals of Corporate Finance

ISBN: 978-0132148238

2nd edition

Authors: Berk, DeMarzo, Harford

See More Books

Question Posted: Jan 14, 2012 02:20 AM

See More Questions

How much would you have to deposit in an account today to have $3000 in a five- year term deposit at maturity if interest is 7.75% compounded annually?
How much would you have to invest today to be able to withdraw $4,090 each month, for 25 months, (starting next month), if your investments earn 3.4% APR (compounded monthly)?
How much would you have to pay into an account at the end of every 6 months to accumulate $10 000 in eight years if interest is 3% compounded semi-annually?
10. A light cord is wrapped around a wheel, R = 0.10 m and rotational inertia I about its axis and is attached to mass, m = 2 kg, see about its fixed axis and the object accelerates downward, (take g...
How can the payroll module of an AIS be breached? What controls should be set up to help prevent this?
Presented below are the components related to an office block that Veenman NV is considering purchasing for 10,000,000. Instructions a. Compute depreciation expense for 2022, assuming that Veenman...
What is a CDR and what is it intended to accomplish?
In Problems 5-15 and 5-16, three different forecasts were developed for the demand for fertilizer. These three forecasts are a 3-year moving average, a weighted moving average, and a trend line....
Joe aged 24, and Kate, aged 24, met in college. While studying, Joe worked part-time selling car parts to autobody shops in the GTA. He earned $12,000 a year, for two years. After graduating from...
Suppose an individual makes an initial investment of $2500 in an account that earns 7.8%, compounded monthly, and makes additional contributions of $100 at the end of each month for a period of 12...
You expect to have $1000 in one year. A bank is offering loans at 6% interest per year. How much can you borrow today?
You plan to borrow $1000 from a bank. In exchange for $1000 today, you promise to pay $1080 in one year. What does the cash flow timeline look like from your perspective? What does it look like from...
Goodwin Grocery reported the following financial facts for 2011 and 2012: Goodwin made two accounting errors during the years: 1. 2011 ending inventory was understated by $3,000. 2. 2012 ending...
Consider a room that is $20 \mathrm{ft}$ long, $15 \mathrm{ft}$ wide, and $8 \mathrm{ft}$ high. For standard sea level conditions, calculate the mass of air in the room in slugs. Calculate the...
Goose down is used in a wide variety of products, including jackets, bedding, and pillows. Lands End, a retailer of clothing and bedding items, uses goose down in many of its products. For a variety...
Refer to Noodle Time in E7-26A. Mason did franchise her restaurant concept. Because of Noodle Times success, Noodles n More has come on the scene as a competitor. To maintain its market share, Noodle...
Sketch the requested conic sections in Problems 14-23 using the definition. A circle with radius 3
Refer to Granville Steel Parts in E7-28A. The owner feels like hes in a giant squeeze play: The automotive manufacturers are demanding lower prices, and the steel producers have increased raw...
During the design phase in object-oriented design, are any changes made to the use cases created earlier? If so, what are these changes, and what is their overall purpose?
Hardin Services Co. experienced the following events in 2016: 1. Provided services on account. 2. Collected cash for accounts receivable. 3. Attempted to collect an account and, when unsuccessful,...
Draw the Lewis structure for the hypothetical molecule N 6 , consisting of a six-membered ring of nitrogen atoms. Using bond enthalpies, calculate the enthalpy of reaction for the decomposition of N...
Use of excess cash another option usually available is to reduce the firms outstanding debt. What are the advantages and disadvantages of this use of excess cash?
Float an unfortunately common practice goes like this, suppose you are out of money in your checking account; however, your local grocery store will, as convenience to you as a customer, cash a check...
Float an unfortunately common practice goes like this, suppose you are out of money in your checking account; however, your local grocery store will, as convenience to you as a customer, cash a check...
Managing finances is essential for any business, big or small. It involves careful planning and allocation of resources to achieve goals. Budgeting is crucial as it helps firms manage their cash...
Your boss (for 1 of the six organizations you have to choose from-Google, Walt Disney Company, Amazon, P&G, 3M, or Ford Motor Company) has asked you to represent the organization in an industry panel...
Stefney Christian Date: 06/26/2023 To: From: New England Patriot Subject: Analysis of Aircraft Purchase vs. Chartering Decision I've done a thorough analysis of the decision to buy or charter a plane...

A friend asks to borrow $55 from you and in return will pay you $58 in one

Question:

Step by Step Answer:

abc Plan You are presented with three alternative courses of action You could ...View the full answer

Fundamentals of Corporate Finance

Students also viewed these Corporate Finance questions