Question

You owe $1,200 in 3 months and $1,400 in 11 months. You and your creditor agree you will discharge both debts with one cash payment at 8 months using 9% (M).

Round each answer to the nearest penny (round normally) before you calculate the ONE payment amount, NO dollar ($) signs, Use comma (,) where and when needed

Answer 1

Given that,

Ammunt F3 = $1200 is owed in 3 month and F11 = $1400 in 11 months.

Interest rate r = 9% compounded monthly

So, value of the both the amount in month 8 is

Value in month 8 = F3*(1+r/12)^(5) + F11/(1+r/12)^(3) = 1200*(1+0.09/12)^5 + 1400/(1+0.09/12)^3 = $2614.65

=> Value to pay in 8 months is $2614.65