- Tim has borrowed money from Lisa and proposed to pay back the money in two payments. Tim suggested two options. Option A is to pay Lisa $500 in one month and $2500 in 8 months. Option B is to pay $1000 in 3 months and $2000 in 7 months. Which option has the higher economic value today if money can earn 7% simple interest?
- Tim has borrowed money from Lisa and proposed to pay back the money in two payments. Tim suggested two options. Option A is to pay Lisa $500 in one month and $2500 in 8 months. Option B is to pay $1000 in 3 months and $2000 in 7 months. Which option has the higher economic value today if money can earn 7% simple interest?
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter19: The Basic Tools Of Finance
Section: Chapter Questions
Problem 1CQQ
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![1. Tim has borrowed money from Lisa and proposed to pay back the money in two payments. Tim suggested two
options. Option A is to pay Lisa $500 in one month and $2500 in 8 months. Option B is to pay $1000 in 3 months
and $2000 in 7 months. Which option has the higher economic value today if money can earn 7% simple interest?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffc56f7f6-d3a0-41be-b736-575fa9e10e0e%2F84320214-c55e-4e99-af95-cdf7f28a9c31%2Falbhr69_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1. Tim has borrowed money from Lisa and proposed to pay back the money in two payments. Tim suggested two
options. Option A is to pay Lisa $500 in one month and $2500 in 8 months. Option B is to pay $1000 in 3 months
and $2000 in 7 months. Which option has the higher economic value today if money can earn 7% simple interest?
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