Question

A trustworthy friend asks to borrow money from you today. She promises to pay you exactly $3750 in 3 years, and she insists on your earning the same interest rate on your loan to her as you would have earned keeping your money in your savings account that earns 2%. How much can you lend her today?

Answer 1

$3,533.71

Step-by-step explanation:

Amount to be lent today = Future value/(1+Interest rate)^Number of years

Amount to be lent today = 3750/(1.02)^3

Amount to be lent today = 3750/1.061208

Amount to be lent today = $3,533.71

Hence, amount to be lent today = $3,533.71