Answered: Suppose you lend $11,500 to a friend…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 11PROB

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Question

Suppose you lend

$11,500

to a friend at an APR of

10.00%.

Your friend will pay you back beginning next month with

monthly installments. You can reinvest the payments you receive in your money market account at an APR of

1.10%,

calculated monthly.

a. How much will your friend pay you each month? ______________

b. How much will you have in your account at the end of

months? (to nearest $___________________

c. What is your effective annual return (EAR), _._ _%?______________

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

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