Chapter 5 Self-Study Questions
1. | Depends on the situation. Assuming that the savings account interest rate is 6% and the loan interest rate is 10%, the company borrowing $10,000 would pay $1000 in interest to the financial institution, whereas the financial institution would pay $600 in interest to the depositor. The financial institution would net $1000 – $600 = $400. |
2. | I = $2500 * 7 years * 0.09 = $1575, F = P + I = $2500 + $1575 = $4075 |
3. |
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