Supppose you lend a friend $100 on January 1st, and in return she offers to pay you back $10 at the start of each month (including this month, for some weird reason) for one year (the last payment is January 1st of the next year). What is the present value of this deal if you assume a market rate of 5% APR compounding monthly? Is the present value worth more than the $100 you leant her? .

In the above question we are given that. Monthly payment from January 1st to January 1st of next…

Answered: Supppose you lend a friend $100 on…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 31P

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Supppose you lend a friend $100 on January 1st, and in return she offers to pay you back $10 at the start of each month (including this month, for some weird reason) for one year (the last payment is January 1st of the next year). What is the present value of this deal if you assume a market rate of 5% APR compounding monthly? Is the present value worth more than the $100 you leant her? .

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