9780321818171_berk_ch03

10 per tonne a should he make the exchange b does it

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Unformatted text preview: of almonds and his neighbour produces 800 tonnes of walnuts. If the market price of almonds is $100 per tonne and the market price of walnuts is $1.10 per tonne: a. Should he make the exchange? b. Does it matter whether he prefers almonds or walnuts? Why or why not? The Time Value of Money and Interest Rates 6. You have $100 and a bank is offering 5% interest on deposits. If you deposit the money in the bank, how much will you have in one year? 7. You expect to have $1000 in one year. A bank is offering loans at 6% interest per year. How much can you borrow today? 8. A friend asks to borrow $55 from you and in return will pay you $58 in one year. If your bank is offering a 6% interest rate on deposits and loans: a. How much would you have in one year if you deposited the $55 instead? b. How much money could you borrow today if you pay the bank $58 in one year? c. Should you lend the money to your friend or deposit it in the bank? 9. Suppose the interest rate is 4%. a. Having $200 today is equivalent to having what...
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