Howard owns a small electronics repair shop. He wants to borrow $10,000 now and repay it over the next 1 or 2 years. He believes that new diagnostic test equipment will allow him to work on a wider variety of electronic items and increase his annual revenue. Howard received 2-year repayment options from banks A and B. Amount to pay $ per year Amount to pay $ per year Year Bank A Bank B 1 5,378.05 5000.00 2 5,378.05 5775.00 Total Paid 10,756.10 10775.00 During a family conversation, Howard’s brother-in-law offered to lend him the $10,000 now and take $10,600 after exactly 1 year. Now Howard has three options and wonders which one to take. Which one is economically the best in terms of interest rate? Show hand to hand solution.
Howard owns a small electronics repair shop. He wants to borrow $10,000 now and repay it over the next 1 or 2 years. He believes that new diagnostic test equipment will allow him to work on a wider variety of electronic items and increase his annual revenue. Howard received 2-year repayment options from banks A and B. Amount to pay $ per year Amount to pay $ per year Year Bank A Bank B 1 5,378.05 5000.00 2 5,378.05 5775.00 Total Paid 10,756.10 10775.00 During a family conversation, Howard’s brother-in-law offered to lend him the $10,000 now and take $10,600 after exactly 1 year. Now Howard has three options and wonders which one to take. Which one is economically the best in terms of interest rate? Show hand to hand solution.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Howard owns a small electronics repair shop. He wants to borrow $10,000 now and repay it over the next 1 or 2 years. He believes that new diagnostic test equipment will allow him to work on a wider variety of electronic items and increase his annual revenue. Howard received 2-year repayment options from banks A and B.
Amount to pay $ per year | Amount to pay $ per year | |
Year | Bank A | Bank B |
1 | 5,378.05 | 5000.00 |
2 | 5,378.05 | 5775.00 |
Total Paid | 10,756.10 | 10775.00 |
During a family conversation, Howard’s brother-in-law offered to lend him the $10,000 now and take $10,600 after exactly 1 year. Now Howard has three options and wonders which one to take. Which one is economically the best in terms of interest rate? Show hand to hand solution.
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