Debts of $1,080.00 due four months ago and $1185.00 due in one month are to be...
Debts of $1,080.00 due four months ago and $1185.00 due in one month are to be settled by two equal payments due now and eight months from now respectively. Find the size of the equal payments using 12% interest and today is the focal date.
Homework Answers
Rate of Interest = 12%
Focal Date = Today
Debt four months ago from today = $1080
Debt in one month from today = $1185
Lets the size of equal payment = $X
To Solve the problem bring all the cash flows at the focal date
Therefore,
1080(1.12)(4/12) + 1185/(1.12)(1/12) = X + X/(1.12)(8/12)
1121.57 + 1173.86 = X + 0.9272X
1.9272X = $2295.43
X = $1191.07
the size of equal payment = $1191.07
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