An obligation can be settled by making a payment of $7500.00 now and a final payment of $10 000.00 in five years. Alternatively the obligation can be settled by payments of $750.00 at the end of every three months for five years. If interest rate is 10% compounded quarterly, determine the preferred alternative.

Question

Quizplus · Accepted Answer

The Answer of An obligation can be settled by making a payment of $7500.00 now and a final payment of $10 000.00 in five years. Alternatively the obligation can be settled by payments of $750.00 at the end of every three months for five years. If interest rate is 10% compounded quarterly, determine the preferred alternative.

An Obligation Can Be Settled by Making a Payment of $7500.00