Asked by Thara!
Two payments of $10,000 and $12,000 must be made 1 year and 4 years from now. If money can earn 9% compounded monthly, what single payment 2 years from now would be equivalent to the two scheduled payments?
Answers
Answered by
Reiny
I hope they teach you this topic by having you do a "time graph"
Draw a number line, label the zero as "now" and mark in the years as 1, 2, 3, 4
write $10000 above the 1 year, and 12000 above the 4 year mark.
write $x below the 2 year mark.
Now " mathematically move" the values above the line to the same time spot as those below the line, and equate them, ...
x = 10000(1.0075)^12 + 12000(1.0075)^-24
= 20968.05
Draw a number line, label the zero as "now" and mark in the years as 1, 2, 3, 4
write $10000 above the 1 year, and 12000 above the 4 year mark.
write $x below the 2 year mark.
Now " mathematically move" the values above the line to the same time spot as those below the line, and equate them, ...
x = 10000(1.0075)^12 + 12000(1.0075)^-24
= 20968.05
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