A debt of $5000 due today and a debt of $5000 due 10 years from now are to be repaid by two equal payments, one 5 and one 8 years from now, Assume a nominal rate of 5.7degree compounded semiannually (twice a year). The final payment should be $ (Round to the nearest cent only at the end of your calculation.)
Solution
Answer;
The $ 5000 dur today.
i = 5.7 / 2 = 2.85% Semi annually = 0.0282
X = equal payments due 5 years acend 8 years hence.
V = 1 / ( 1 + i )
PV of $X due 5 years hence is XV 10 ( 10 6 - month periods)
PV of $X due 8 years hensce is XV 16 ( 16 6 - month periods )
We have ,
XV 10 + XV 14 = 5000
5000 / ( ( 1/ 0.0282) 10 + ( 1/ 0.0282 ) 16 = $ 3662.12
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A debt of $5000 due today and a debt of $5000 due 10 years from now ar.docx
1. A debt of $5000 due today and a debt of $5000 due 10 years from now are to be repaid by two
equal payments, one 5 and one 8 years from now, Assume a nominal rate of 5.7degree
compounded semiannually (twice a year). The final payment should be $ (Round to the nearest
cent only at the end of your calculation.)
Solution
Answer;
The $ 5000 dur today.
i = 5.7 / 2 = 2.85% Semi annually = 0.0282
X = equal payments due 5 years acend 8 years hence.
V = 1 / ( 1 + i )
PV of $X due 5 years hence is XV 10
( 10 6 - month periods)
PV of $X due 8 years hensce is XV 16
( 16 6 - month periods )
We have ,
XV 10
+ XV 14
= 5000
5000 / ( ( 1/ 0.0282) 10
+ ( 1/ 0.0282 ) 16
= $ 3662.12
