Simple interest multiples the interest rate by time period

Reference no: EM13876311

#1) How much money do you need to lend today in order to receive $1,000 in 1 year (annual compounding) at an interest rate of: 6%?

It is sufficient to know that an investment period for less than a year uses simple interest. Simple interest multiples the interest rate by the time period. In the U.S. the time period for these money market instruments is measured as a fraction: the numerator is the precise number of days in the time period and the denominator is 360. For example, the interest earned on a 10-day investment at 3% is .03×(10/360)×investment.

#2) How much money do you need to lend today in order to receive $1,000 in 6 months (money market!) at an interest rate of 5.5%?

Reference no: EM13876311

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