Thinking Algebraically

Some years are better than others for companies to go public. It depends on how much money they think they will generate by going public and how much it would cost them to borrow from a bank, instead of selling shares for their company. This is a list of examples of interest rates for the past seven years.

Interest Rates

2015	2016	2017	2018	2019	2020	2021
8.5%	9.5%	4.75%	4.25%	4%	5.25%	7.25%

1. Is it better to have a higher interest rate when a company borrows money or to have a lower interest rate? Why?

2. In which years would it have cost companies more to borrow the money? In which years would it have cost less? How do you know?

3. Write a formula that expressed the interest, i, that a company will pay on a one-year loan at an interest rate, r.

4. If a company needed to borrow $15,000,000, how much more would it pay in one year of simple interest if it borrowed the money in 2016 as opposed to 2017? Make sure you show your calculations.

5. If a company needed to borrow $200,000,000, how much more money would it cost in one year of simple interest if it borrowed the money in 2018 versus 2019? Make sure you show your calculations.