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: Return Student (Percent) Jacques Musashi Rina 18 Assume borrowing and lending is prohibited, so each student uses only personal saving to finance his or her own investment project. Complete the following table with how much each student will have a year later when the project pays its return. Money a Year Later Student (Dollars) Jacques Musashi Rina

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
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Chapter16: The Markets For Labor, Capital, And Land
Section: Chapter Questions
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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:
Return
Student
(Percent)
Jacques
6.
Musashi
Rina
18
Assume borrowing and lending is prohibited, so each student uses only personal saving to finance his or her own investment project.
Complete the following table with how much each student will have a year later when the project pays its return.
Money a Year Later
Student
(Dollars)
Jacques
Musashi
Rina
Transcribed Image Text: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: Return Student (Percent) Jacques 6. Musashi Rina 18 Assume borrowing and lending is prohibited, so each student uses only personal saving to finance his or her own investment project. Complete the following table with how much each student will have a year later when the project pays its return. Money a Year Later Student (Dollars) Jacques Musashi Rina
Now suppose their school opens up a market for loanable funds in which students can borrow and lend among themselves at an interest rate r.
A student would choose to be a borrower in this market if his or her expected rate of return is
than r.
Suppose the interest rate is 7 percent.
Among these three students, the quantity of loanable funds supplied would be $
and quantity demanded would be $
Now suppose the interest rate is 10 percent.
Among these three students, the quantity of loanable funds supplied would be $
, and quantity demanded would be $
At an interest rate of
the loanable funds market among these three students would be in equilibrium. At this interest rate,
would want to borrow, and
would want to lend.
Suppose the interest rate is at the equilibrium rate.
Complete the following table with how much each student will have a year later after the investment projects pay their return and loans have been
repaid.
Money a Year Later
Student
(Dollars)
Jacques
Musashi
Rina
True or False: Both borrowers and lenders are made better off.
True
False
Transcribed Image Text:Now suppose their school opens up a market for loanable funds in which students can borrow and lend among themselves at an interest rate r. A student would choose to be a borrower in this market if his or her expected rate of return is than r. Suppose the interest rate is 7 percent. Among these three students, the quantity of loanable funds supplied would be $ and quantity demanded would be $ Now suppose the interest rate is 10 percent. Among these three students, the quantity of loanable funds supplied would be $ , and quantity demanded would be $ At an interest rate of the loanable funds market among these three students would be in equilibrium. At this interest rate, would want to borrow, and would want to lend. Suppose the interest rate is at the equilibrium rate. Complete the following table with how much each student will have a year later after the investment projects pay their return and loans have been repaid. Money a Year Later Student (Dollars) Jacques Musashi Rina True or False: Both borrowers and lenders are made better off. True False
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