A $25,000 obligation is to be repaid by two payments. The first payment is one year from now, while the second is 2 years from now. In addition, the second payment will be twice the amount of the first. Interest is 6.65% compounded annually. Using the financial functions on the calculator, determine the size of each payment.
A) Payment #1 = $8,887.50; Payment #2 = $17,775
B) Payment #1 = $5,550.50; Payment #2 = $11,101
C) Payment #1 = $8,500; Payment #2 = $17,000
D) Payment #1 = $10,000.50; Payment #2 = $20,001
E) Payment #1 = $17,775; Payment #2 = $8,887.50

Question

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The present value of the payments must equal $25,000. Let the first payment be X and the second payment be 2X. Using the present value formula for each payment and summing them equals $25,000. Solving for X gives the correct amounts.

A $25,000 Obligation Is to Be Repaid by Two Payments