# arithmetic

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Barry and Steve are good friends. Barry wants to buy a new computer, but he doesn't have the money for it right now. Barry says he will pay Steve \$2000.00 in five years if Steve gives him \$1600.00 for the computer today. Steve figures that there is an interest rate of 6% if he were to put the money in a bank instead of lending it to Barry. Assuming that there is no risk of Barry not paying the \$2000.00 when he says he will, should Steve go through with the loan or should he put his money in the bank? Explain the answer.

• arithmetic -

At 6% interest, Steve would earn \$96 a year if he put the \$1600 in the bank.

0.06 * 1600 = 96

What do you think Steve should do?

• arithmetic -

He should put the money in the bank.So that he doesnot hafe to make aloan later.

• arithmetic -

Actually he could earn \$2141+ if he put the money in the the bank for 5 years and he would have immediate access to it if he needed it.

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