Three students have each saved $1,000. Each has an investment opportunity in which he or she can invest up to $2,000. He

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answerhappygod
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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. He

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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:
Harry 5 percent
Ron 8 percent
Hermione 20 percent
a. If borrowing and lending is 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 can 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?
d. At what interest rate would the loanable funds market among
these three students be in equilibrium? At this interest rate,
which student(s) would borrow and which student(s) would lend?
e. At the equilibrium interest rate, how much does each student
have a year later after the investment projects pay their return
and loans have been repaid? Compare your answers to those you gave
in part (a). Who benefits from the existence of the loanable funds
market—the borrowers or the lenders? Is anyone worse off?
Help me pls !
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