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1. Simple versus compound interest Aa Aa Financial contracts involving investments, mortgages, loans, and so on are based on either a fixed or a variable
1. Simple versus compound interest Aa Aa Financial contracts involving investments, mortgages, loans, and so on are based on either a fixed or a variable interest rate. Assume that fixed interest rates are used throughout this question Heather plans to loan $900 to her friend, who will pay a simple interest rate of 7.8% every year for the loan. If no payments are made and no further borrowing occurs between them for seven years, then how much money will Heather's friend owe her? O $170.20 $1,391.40 O $%1,522.56 O $975.68 Now, assume that Heather's friend volunteers to pay compound$118.76 interest instead of simple interest for her loan. If interest is accrued at 7.8% compounded annually, all other things being equal, how much money will Heather's friend owe her in seven years? O $970.20 O $1,522.56 O $1,391.40 Heather has another investment option in the market that pays 7.8% nominal interest, but it's compounded quarterly. Keeping everything else constant, how much money will Heather have in seven years if she invests $900 in this fund? O $972.28 O $170.20 O $129.96 O $1,545.56
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