Question

A loan payment of $1400.00 was due 20 days ago and another payment of $800.00 is due 70 days from now. What single payment 110 days from now will pay off the two obligations if interest is to be 6% and the agreed focal date is 110 days from now?

The value of the payment is $___

(The final answer must be rounded to the nearest cent as needed. Round all the intermediate values to six decimals as needed.)

Answer 1

Following Loan payments are due:-

Loan Payment 1(LP1) due 20 days ago= $1400

Loan Payment 2(LP2) due in 70 days = $800

All the above payments are to be paid in a single payment on 110 days from now.

Lets take the Focal date as 110 days from now.

We will Compound Interest in LP1 and LP2 on Focal date as they are due before the focal date.

where, r = Interest rate = 6%

m = no of times compounding in a year = 365

n = Focal date = 110

Future Value = $1430.2373 + $805.3277

Future Value = $ 1430.24

So, The value of the payment is $1430.24