Even payments of $600 are made in year 0, 1, 2, 3, 4 and 5 into...
Even payments of $600 are made in year 0, 1, 2, 3, 4 and 5 into an account that makes 10% interest. Instead of that investment scheme, find the amount of two equal payments made in year 1 and year 4 that would give an equivalent balance.
Homework Answers
set the equation as below
600+600/(1+10%)^1+600/(1+10%)^2+600/(1+10%)^3+600/(1+10%)^4+600/(1+10%)^5=A/(1+10%)^1+A/(1+10%)^4
600+600/(1+10%)^1+600/(1+10%)^2+600/(1+10%)^3+600/(1+10%)^4+600/(1+10%)^5=A*(1/(1+10%)^1+1/(1+10%)^4)
A=(600+600/(1+10%)^1+600/(1+10%)^2+600/(1+10%)^3+600/(1+10%)^4+600/(1+10%)^5)/((1/(1+10%)^1+1/(1+10%)^4))
=1805.45 (answer)
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