Two payments of $1,000 now and $3,000 in 6 months are to be replaced by $2,500 in 4 months and another in 9 months. If the rate of interest is 6.3% annually, determine the value of the final payment in 9 months if the focal point is in 9 months.
A) $1,532.67
B) $1,528.875
C) $1,502.65
D) $1,498.13
E) $1,486.86

Question

Quizplus · Accepted Answer

To find the value of the final payment, we need to equate the present value of the original payments to the present value of the new payments at the focal point in 9 months. The interest rate is 6.3% annually, which is 0.525% per month. Calculate the present value of each payment and solve for the unknown payment.

Two Payments of $1,000 Now and $3,000 in 6 Months