# A lender is promised a $100 payment (including interest) one year from today. If the lender has a... ## Question: A lender is promised a$100 payment (including interest) one year from today. If the lender has a 6% opportunity cost of money, he/she should be willing to accept what amount of money today?

a. $100.00 b.$106.20

c. $96.40 d.$94.34

A saver knows that if she put $94 in the bank today she will receive$100 from the bank 1 year from now, including the interest she will earn. What is the interest rate she is earning?

a. 5.10%

b. 6.00%

c. 5.52%

d. 5.26%

## Compound Interest:

Compound interest (or compounding interest) is interest calculated on the initial principal, which also includes all of the accumulated interest of previous periods of a deposit or loan

1. A= 100, r= 6%, t=1, P=?

{eq}P= \frac{A}{{(1+r)}^t} {/eq}

{eq}P= \frac{100}{{(1+0.06)}^1} {/eq}= $94.34 P=$94.34

2. A= 100, r= ?, t=1, P=94

{eq}r= 1\times [(\frac{A}{P})^{1/rt} - 1] {/eq}

{eq}r= 1\times [(\frac{100}{94})^{1/r} - 1] {/eq}= 0.06383=6.383%

Rate= 6.383%