Martin is offered an investment where for $5000 today, he will receive $5250 in one year. He decides to borrow $5000 from the bank to make this investment. What is the maximum interest rate the bank needs to offer on the loan if Martin is at least to break even on this investment?

Question

Quizplus · Accepted Answer

To break even, the interest on the $5000 loan should not exceed the $250 profit from the investment. The interest rate is calculated as ($250/$5000) * 100% = 5.0%.

Martin Is Offered an Investment Where for $5000 Today, He