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Okay, guys, this is chapter 26 problem 7.
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This problem's a little bit longer.
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It's in five parts.
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So overall, we're given that each student has $1 ,000 to invest.
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Harry can invest at 5 % and ron can invest at 8%.
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And hermione can invest at 20%, but each can invest a maximum of $2 ,000.
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Remember to start with, they only each have $1 ,000.
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In part a, we assume that bond.
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And lending are prohibited.
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So how much will each student end up with after investing? so rather that harry can invest at 5%, so at 5%, so that's $1 ,000 times 5%, it gives him $1 ,050.
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Ron can invest at 8 % times 0 .08 will give him $1 ,080, and hermione can invest at 8 % times 0 .08 will give him 180 and hermione can invest at 20%, 1 ,000 times 0 .2.
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There's point and there's point for 1 ,200.
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So for part e, now we're assuming that there is a loan market with an interest rate are, so what are the determining factors for who's going to be a borrower and who's going to be a lender? so there are going to be two relevant pieces of information.
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The first is the rate of the ten that you can get on an investment.
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So i'm going to spend return.
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We were given that in part a, right? it's 5 % for harry.
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It's 8 % for ron.
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And it's 20 % for hermione.
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The second piece of information is going to be.
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Be what's the rate at which the funds can be lent and borrowed.
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So what is r? so what's the investment return and what is r? those are going to be the two relevant pieces of information for who will be a lender and who will be a borrower.
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So for question c, what would be the quantity of low -able funds supplied and demanded at 7%.
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So at 7%, at 7%, at 7%, both ron and hermione can invest at a higher rate, so they're both going to demand money.
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So they want more to invest.
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But harry can only make 5 % from his investment...