Question

Your friend has a trust fund that will pay him $100,000 at the end of 10 years. Your friend, however, wants his money today. He promises to sign his trust fund over to you if you give him some money today. You require a 20% interest rate on money you lend to friends. How much would you be willing to lend under these terms?
(a) $16,151.
(b) $50,000
(c) $80,000
(d) $0it would be impossible to earn 20% interest on the loan.

Answer

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