+598 A $4000 debt due in four years was paid with $3885.35 cash. If money is worth 7% compounded monthly, how many months before the due date was the debt paid?
Any steps and help would be greatly appreciated.
Thanks
A $4000 debt due in four years was paid with $3885.35 cash. If money is worth 7% compounded monthly, how many months before the due date was the debt paid?
Here, you have to find the PV of $4,000 =$3,025.60
Then, you find the number of months this PV grows to $3,885..35
If you do right, you will see that it takes 43 months. Therefore,
48 - 43=5 months earlier, that the loan was paid off.
