: Your friend asks if youll lend $1000 to him now, and he promises to pay you $1025 in one year.

Alternatively, you could lend (or deposit) $1000 to the bank which promises to pay you $1015 in one year.

You can assume that your friend and the bank will both definitely pay you back.

What is the net present value (NPV) of lending to your friend rather than lending to the bank, measured in dollars now?

(a) $0

(b) $9.85

(c) $10

(d) $15

(e) $25