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3 February, 13:08

A trustworthy friend asks to borrow money from you today. She promises to pay you exactly $3500 in 2 years, and she insists on your earning the same interest rate on your loan to her as you would have earned keeping your money in your savings account that earns 2%. How much can you lend her today

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  1. 3 February, 14:07
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    I can lend her $3364 today

    Explanation:

    A = P (1 + r) ^n

    A = $3500

    r = 2% = 2/100 = 0.02

    n = 2 years

    3500 = P (1 + 0.02) ^2

    3500 = P (1.02) ^2

    P = 3500/1.0404 = $3364 (to the nearest whole number)
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