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Home Q & A Board Science-Related Homework Help Mathematics
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ikrabbe ikrabbe
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6 years ago
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.
Textbook 
Contemporary Business Mathematics with Canadian Applications

Contemporary Business Mathematics with Canadian Applications


Edition: 11th
Authors:
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#1
6 years ago
PV of 10 000: n = 5(4) = 20; i =   = 0.025; FV = 10 000; I/Y = 10;P/Y = C/Y = 4
PV = 10000  = 6102.71

ALT. 1 = 7500 + 6102.71 = 13 602.71 = $13 603
Programmed solution:

For ALT. 2:
PMT = 750; n = 5(4) = 20; i = 0.025; I/Y = 10; P/Y = C/Y = 4
PV = 750  = 11 691.87 = $11 692

Programmed solution:

ALT. 2 is better (less to pay)
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