1. A student needs to borrow $3500 for living expenses for a study-abroad progra
ID: 3137097 • Letter: 1
Question
1. A student needs to borrow $3500 for living expenses for a study-abroad program in Hong Kong. She feels that she will be able to pay back only $3750 in 7 months after she works in the summer, what is th highest interest rate she is able to pay? 2. Use intuition to decide which of the following you would prefer: (a) a salary of $35,000 per year with no raises for 10 years or (b) a salary of $32,000 per year with annual raises of 3% per year of each of the next 10 years. Explain the reason for your choice. If an organization needs to have $1,000,000 in 10 years. How much should it invest now if it can draw 8.5% compounded semiannually? e invested $25,000 in an account that will draw 6.9% interest c mounded quarterly for the next iO years while Susan invests S25 000 in an acount hat will draw 6.8% interest compounded continuously over the next 10 years, who will have the most money at the end of the 10 years? s, what is the effective interest rate for 8% interest compounded dailyExplanation / Answer
She can payback the loan of 3500$ as 3750$ after 7 months;
Thus, 3750/3500 = 1.071428
Which means she can pay 7.1428% higher after 7 months;
So, maximum interest rate that she can pay is = 7.1428*12/7 = 12.24489~= 12.25%
Thus, the maximum interest rate that she is able to pay is 12.25% annual rate;
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