+598 A financial agreement requires the payment of $1200 in 9 months, $1400 in 18 months, and $1600 in 30 months. When would an alternative single payment of $4000 have to be made if money is worth 7% compounded quarterly?
Any help would be greatly appreciated.
A financial agreement requires the payment of $1200 in 9 months, $1400 in 18 months, and $1600 in 30 months. When would an alternative single payment of $4000 have to be made if money is worth 7% compounded quarterly?
This is very similar to the Hockey player problem. You have to find the PV of the 3 payments, $1,200, $1,400 and $1,600 which will give you $3,745.91. So, the question becomes: how long does it take for this amount to grow to $4,000?. If you solve for n, you will see that it takes 11.35 months for the alternative payment of $4,000 to be made.
