Three debt payments, the first in the amount of $1600.00 due today, the second in the amount of $7200.00 due in 15 months and the third in the amount of $5000 due in 24 months, are to be settled by two equal payments nine months from now and a final payment in 21 months. Determine the size of the equal payments if the money is worth 12.12% p.a. compounded monthly.
A) $6900.00
B) $6415.26
C) $6801.60
D) $12 830.51
E) $13 800.00

Question

Quizplus · Accepted Answer

The present value of the debt payments and the present value of the settlement payments must be equal. By calculating the present value of each debt and settlement payment using the given interest rate, we find that the equal payments should be $6801.60.

Three Debt Payments, the First in the Amount of $1600