How can you determine whether two payments are equivalent to each other? a. Calculate the future...
How can you determine whether two payments are equivalent to each other?
- a. Calculate the future value of the earlier payment at the date of the later payment. If the future value is equal to the later payment, the two payments are equivalent.
- b. Calculate the present value of the later payment at the date of the earlier payment. If the present values are equal, the two payments are equivalent.
- c. Both a and b are correct
- d. Neither a or b are correct
Homework Answers
The answer is C - Both a and b are correct
Two payments are equivalent to each other when:
- Future value of the earlier payment (1st payment) = Later payment (2nd payment)
(or)
- Present value of the later payment (2nd payment) = Earlier payment (1st payment)
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