An $18,000 obligation is to be repaid by two payments. The first payment is six months from now, while the second is 18 months from now. In addition, the second payment will be half the amount of the first. Interest is 5.15% compounded semi-annually. Using the financial functions on the calculator, determine the size of each payment.
A) Payment #1 = $12,516; Payment #2 = $6,258
B) Payment #1 = $10,440; Payment #2 = $5,220
C) Payment #1 = $11,000; Payment #2 = $5,500
D) Payment #1 = $12,000; Payment #2 = $6,000
E) Payment #1 = $6,000; Payment #2 = $18,000

Question

Quizplus · Accepted Answer

To solve this, we use the present value formula for each payment, discounting them back to the present at the given interest rate, and ensuring their sum equals $18,000. The correct amounts are found by setting up and solving the equation with the given interest rate and time periods, leading to the conclusion that option A is correct.

An $18,000 Obligation Is to Be Repaid by Two Payments