Your friend in problem comes up with another way to pay off the $300 he borrowed from
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Question:
Your friend in problem comes up with another way to pay off the $300 he borrowed from you. He has a reputable friend who is going to pay our friend $400 in 4 year(to cover a loan he had made to him earlier). Your friend would just have this reputable person pay you the $400 instead in order to liquidate the $300 loan he made from you. Since you know this is an honest ad reputable person, you would consider this deal if you earned at least 7% per year on the deal.
Fv=PV
$400=300 (l+t)^4
(l+t)^4=400/300 =1.3333333
(l+t)=1.3333333^0.25=1.07457
R=7.46%
What kind of return would you be earning in this new deal?
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
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