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Can someone help me with a finance question

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My minds going blank at the moment. the question is below. Was going to talk about inflation and value of money changing over the year but the question mentions how inflation stays the same, cant rea… Read More
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2y, 4m agoPosted 2 years, 4 months ago
My minds going blank at the moment.
the question is below. Was going to talk about inflation and value of money changing over the year but the question mentions how inflation stays the same, cant really think of anything else. Google has been useless at the moment.

Thank you in advance,

(part of uni work)

(Your friend has borrowed from you £500 which he promises to give back after one year. Suppose there is no inflation, will the value of the £500 repayment still be the same with what you have lent to him? )
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2y, 4m agoPosted 2 years, 4 months ago
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#1
yes because you did not ask for it back with intrest at the time of borrowing
#2
pamelamoss2
yes because you did not ask for it back with intrest at the time of borrowing

Same answer. You did not specify interest, so you get back the same amount.
#3
pamelamoss2
yes because you did not ask for it back with intrest at the time of borrowing

hahaha thanks alot dude, my mind just went blank . forgot all about interests , as the £500 can be saved in a bank and value will increase etc.


( uni deadline next week, and been doing work alll day, mind just went blank for that question), thanks alot again
#4
No, after one year your friend would have spent if on drugs, beer and pot noodles. How he proposes to return it will be with items valued by the local cash converters (less than £500)

Hope this helps
#5
Of course it wont - because even with rubbish interest rates you could make £5 or £10 on the money over the year . Which is obviously better than just getting the capital back .
#6
It depends on your financial situation too. You might be in a position to lend your friend £500 now but in 12 months time, your own situation has changed so that £500 has become more valuable to you....
#7
The value of the £500 pounds will be the same - in terms of purchasing power - since no inflation.

You will have suffered opportunity cost - the value of the money that you could have made by investing or using the £500 elsewhere - but I guess that's irrelevant if the topic is inflation.
#8
But prices rise and fall regardless of inflation (look at the cost of fuel) so £500 last year is worth more than £500 this year.
#9
#7 is definitely adding to your answer.
#10
mas99
The value of the £500 pounds will be the same - in terms of purchasing power - since no inflation.

You will have suffered opportunity cost - the value of the money that you could have made by investing or using the £500 elsewhere - but I guess that's irrelevant if the topic is inflation.


To add to that opportunity cost is 500*(1+r), where r is the interest rate. For example if the interest rate is 3 percent then 500*(1+0.03) = £515. Sk you have missed out on the £15 interest.
#11
madridpaid_the_referee
mas99
The value of the £500 pounds will be the same - in terms of purchasing power - since no inflation.

You will have suffered opportunity cost - the value of the money that you could have made by investing or using the £500 elsewhere - but I guess that's irrelevant if the topic is inflation.

To add to that opportunity cost is 500*(1+r), where r is the interest rate. For example if the interest rate is 3 percent then 500*(1+0.03) = £515. Sk you have missed out on the £15 interest.

Did that a while ago . Thanks anyway for the help

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