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(15 points) Teresa offers to pay Linxiu $1,000 a year from now if she will loan her money today. Suppose that Linxiu wants to earn
(15 points) Teresa offers to pay Linxiu $1,000 a year from now if she will loan her money today. Suppose that Linxiu wants to earn 10% interest and there is no inflation over this period. Round all your answers to two decimals. a. What is the maximum amount Linxiu will lend Teresa, given her offer? Show your work. b. Suppose that Teresa is willing to pay at most $90 in interest payments. What is the maximum interest rate she is willing to pay? Write as a percentage. c. Suppose Linxiu anticipates that the CPI will rise from 100 to 105 over the next year. How will this affect the interest rate she will charge? How will this affect the amount she is willing to lend
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