+598 Ramon wishes to replace payments of $900 due today and $500 due in 22 months by a single equivalent payment 18 months from now. If money is worth 4.8% compounded monthly, what should that payment be? Interim calculations to 3 decimals, final answer rounded to the nearest cent.
Any help with calculations would be greatly appreciated.
Thanks
Ramon wishes to replace payments of $900 due today and $500 due in 22 months by a single equivalent payment 18 months from now. If money is worth 4.8% compounded monthly, what should that payment be? Interim calculations to 3 decimals, final answer rounded to the nearest cent.
Any help with calculations would be greatly appreciated.
First, you have to find the PV of $500 due in 22 months, which comes to:
$457.961. To this you have to add $900 due today, so you have:
$457.961 + $900=$1,357.961 PV of the the two payments. Since Ramon wants to replace these 2 payments by a single payment due in 18 months. So, you have to project this amount 18 months from now at 4.8%, which comes to $1,459.13. This is the single payments replacing the other two of $500 and $900.
The formulae you use are the two common one of PV and FV, which you already have.
