A woman borrowed money and owes $3000 one-year from now and $3000 three-years from now.The loan is renegotiated so that the woman can instead pay $X two-years from now and $4000 four-years from now which will fully pay back the loan.If the interest rate on the loan is j₂ = 8%,what is the value of X?

Question

Quizplus · Accepted Answer

The present value of the new payments is equal to the present value of the old payments.PV = $3000/(1+0.08)^1 + $3000/(1+0.08)^3 = $X/(1+0.08)^2 + $4000/(1+0.08)^4Solving for X, we get X = $2599.25.

A Woman Borrowed Money and Owes $3000 One-Year from Now