Question
1) Suppose that you would like to borrow $500 to do some traveling this summer. Both your brother and your sister offered to lend you
1) Suppose that you would like to borrow $500 to do some traveling this summer. Both your brother and your sister offered to lend you the money at a 10% monthly rate. Your brother will charge you compound interest, while your sister will charge you simple interest. If you plan to pay the money back in 12 months, how much more would you have to pay your brother? (Notice that you are given a monthly rate. This means that 't' must be number of months, not years.)
2) You would like to have $5,000 in 5 years to do some traveling. You are looking at an investment that has had an average return of 9% over the past 3 years and you are hoping that return will continue. How much would you have to invest today if you can earn an interest rate of 9%? (Note: Enter only numbers in your response. Round to 2 decimal places.)
3)An investment will pay $3,000 in 7 years. The fair return on investments of this risk is 6%. What is the fair price of the investment today? If the investment costs $1,900, should you invest?
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