Suppose that you have $100 today and expect to receive $100 one year from today. Your money market account pays an annual interest rate of 25%, and you may borrow money at that interest rate. If you save all your money, how much money will you have one year from today?
A)$100
B)$125
C)$200
D)$225

Question

Quizplus · Accepted Answer

If you save all your money, the $100 you have today will earn 25% interest over the year, resulting in $100 * 1.25 = $125. Adding the $100 you expect to receive in one year, you will have a total of $125 + $100 = $225 one year from today.

Suppose That You Have $100 Today and Expect to Receive