Question 5 of 5 Incorrect Map Sapling Learning macmillan learning Suppose that S

Question

Question 5 of 5 Incorrect Map Sapling Learning macmillan learning Suppose that Sidney runs a micro-financing agency that lends money to people to start small businesses in poor countries. Sidney lends at an interest rate of 8.00% a year. She is currently working out the details to lend Noah and Eliza some money Sidney arranges for all of her clients to repay her one lump sum of $10,000 at the conclusion of the term of the loan. The amount of money that she lends them depends upon the interest rate and the amount of time before repayment. Use the principle of present value to answer the following questions Noah decides that he will be able to repay Sydney in 1 year. How much will he borrow from Sidney today so that he pays her back$9259.26 Number $10,000 in a year? Eliza will need 2 years to repay the loan How much will she borrow today so that she pays Sidney back $10,000 in 2 years? Number $9936.41 Why are present value calculations used? A dollar today is not worth the same amount as a dollar a year from novw The goal of any firm should be profit maximization Many costs are not recoverable and should not be considered in making decisions Consumers often make irrational decisions O O Previous Give Up & View Solution O check Answer Next Exit Hint

Explanation / Answer

Question 1). Solution :- Amount to be borrowed by Noah from the Sydney on today = 10000 / (1 + 0.08)1

= 10000 / (1.08)1

= 10000 / 1.08

= $ 9259.26 (approx).

Conclusion :- Amount to be borrowed by Noah on today = $ 9259.26 (approx).

(Present value calculations are generally used because a dollar today is not worth the same amount as a dollar a year from the now.)

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