. A debt payment of $5500 is due in 27 months. If money is worth 8.4% p.a. compounded quarterly, what is the equivalent payment

( b) 15 months from now? (c) 27 months from now? (d) 36 months from now?

Guest Feb 21, 2017

#1**0 **

. A debt payment of $5500 is due in 27 months. If money is worth 8.4% p.a. compounded quarterly, what is the equivalent payment

( b) 15 months from now? 5 quarters (c) 27 months from now? 9 quarters (d) 36 months from now? 12 quarters

interest rate = 8.4/4 =2.1% = 0.021 every 3 months

I am assuming that the debt of $5500 is due in 27 months. Its monetary value is not that great yet !

\(FV=PV(1+r)^n\\ PV=FV(1+r)^{-n}\\ PV=5500(1.021)^{-9}\)

5500*(1.021)^-9 = 4561.745063099648344

So if $5500 is due in 27 months its current value is $4561.75

( b) 15 months from now? 5 quarters

FV(15months)= 4561.75*1.021^5

4561.75*1.021^5 = $5061.28

(c) 27 months from now? 9 quarters

FV(15months)= $5500 that was given in the question

check:

FV(27months)=4561.75*1.021^9

4561.75*1.021^9 = $5500.0059523168345708 near enough :)

(d) 36 months from now? 12 quarters

FV(36months)=4561.75*1.021^12

4561.75*1.021^12 = $5853.83

Melody
Feb 21, 2017