Your friend wants to borrow $2,000, pay it back in 1 year, and is someone who keeps his or her word.The friend agrees to repay you $2,080 in 1 year.The bank interest rate is 5 percent.Which of the following statements is(are) true?
A) You will be financially worse off if you make the loan rather than deposit $2,000 in the bank.
B) You will be financially better off if you make the loan rather than deposit $2,000 in the bank.
C) The present value of $2,080 payable in one year with an interest rate of 5 percent is $1,904.76, which is less than the value of the $2,000 you have been asked to loan.
D) A and C are true.
Correct Answer:
Verified
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