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(c) If you lend 1000 to a friend for 4 years at no interest with an agreement that the whole sum will be paid back
(c) If you lend 1000 to a friend for 4 years at no interest with an agreement that the whole sum will be paid back to you in four equal instalments. The general inflation rate is expected to remain at 3% per annum during that period. How much money are you losing from your generosity at today's price, even if you ignore the time-value of money? How much are you sacrificing if your normal expected time-value of money is 5\%? [4 Marks]
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