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gewusel gewusel
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6 years ago
Scheduled debt payments of $1500.00 due seven months ago, $1200.00 due two months ago, and $1800.00 due in five months are to be settled by two equal payments now and three months from now respectively. Determine the size of the equal replacement payments at 9% p.a. compounded monthly.
Textbook 
Contemporary Business Mathematics with Canadian Applications

Contemporary Business Mathematics with Canadian Applications


Edition: 11th
Authors:
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6 years ago
Let the size of the equal payments be $x, and the focal point now.
For the $1500.00 debt:
PV = 1500.00; n = 7; i =   = 0.75% = 0.0075 ; I/Y = 9; P/Y = C/Y = 12
FV = PV  = 1500  = 1580.54

Programmed solution:

For the 1200.00 debt the only difference is PV = 1200 and n = 2.
FV = PV  = 1200  = 1218.07

Programmed solution:

For the $1800.00 debt FV = $1800.00 n = 5 and I/Y = 9 and P/Y = C/Y = 12
PV = FV  = 1800  = 1733.99

Programmed solution:

For the first equal payment ($x) now, = $x
For the second equal payment ($x) in three months FV = x and n = 3 .
PV = FV  = x  = 0.977833328 x

Programmed solution:

Payments = debts
x + 0.977833328x = 1580.54 + 1218.07 + 1733.99
   1.977833328x = 4532.60 
   x = 2291.70
The size of the two equal payments is $2291.70.
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