Answer:
We give our friend 437.5 dollars
Explanation:
We have to discount from 500 dollar the interest over time, as the 500 is the value our friend will return in 4 weeks ( a month) not the amount received Hence:
nominal x discount rate x time = discount
being rate and time in the same metric
rate is annual so we express time in portion of a year
500 x -1.5 x 1/12 = -62,5
We have to discount 62.5 dollar from the nominal
nominal less discount = present value
500 - 62.5 = 437.5
