1) Leonard is getting paid from his most recent grant. He has a choice between $
ID: 1115599 • Letter: 1
Question
1) Leonard is getting paid from his most recent grant. He has a choice between $10,000 today, or $15,000 in one year. He will choose the $10,000 today if:
a) 10,000(1+r)> 15,000
b) 15,000(1+r)>10,000
c) 10,000/(1+r)>15,000
d) 10,000(r)>15,000
2) Suppose that you got a $1000 graduation present this spring. If the interest rate is 3% per year and you invest the money for two years, how much will you have in two years (rounded to the nearest dollar)?
a) $1,000 * 2 * 1.03 = $2,060
b) $1000 * 1.03 = $1,030
c) ($1000/1.03) * 1.03) = $1,000
d) $1000 * 1.03 * 1.03 = $1,061
I am really struggling with interest, please help and explain also.
Explanation / Answer
1)
a) 10,000(1+r)> 15,000
the above is the answer
because if you have higher interest rate in the market and invest 10000 for one year and are able to earn higher at the end of the one year resulting in amount more than 15000, then go for 10000 now.
2
If the interest rate is 3% per year and you invest the money for two years, how much will you have in two years
=1000*1.03*1.03
=1061
as compounding effect will take place
the above are the answers
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.