Business
Business, 30.11.2021 21:20, adelfaali99

Three students have each saved $1,000. Each has an investment opportunity in which he or she can invest up to $2,000. Here are the rates of return on the students' investment projects: Harry 5 percent
Ron 8 percent
Hermione 20 percent
a. If borrowing and lending are prohibited, so each student uses only personal saving to finance his or her own investment project, how much will each student have a year later when the project pays its return?
b. Now suppose their school opens up a market for loanable funds in which students ran borrow and lend among themselves at an interest rate r. What would determine whether a student would choose to be a borrower or lender in this market?
c. Among these three students, what would be the quantity of loanable funds supplied and quantity demanded at an interest rate of 7 percent? At 10 percent?

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