: After 4 years, you will pay 5.000 TL. Instead of this, you will pay 1000...

: After 4 years, you will pay 5.000 TL. Instead of this, you will pay 1000 TL now and the balance will be paid after 6 years. If the interest rate is %25, what is the amount paid after 6 years?

Solutions

Expert Solution

First we need to calculate the PV of 5000 paid after 4 years

We are given the following information:

Value of account at time 0	PV	To be calculated
rate of interest	r	25.00%
number of years	n	4
Annual Compounding	frequency	1
Future value	FV	$ 5,000.00

We need to solve the following equation to arrive at the required FV:

To in total we need to pay 2048 now or pay 5000 after 4 years

If we pay 1000 now, the remaining amount will be 1048

Either we pay this now, or we pay the compounded amount at year 6

So at time 6 the payment will be calculated as follows:

We are given the following information:

Value of account at time 0	PV	$ 1,048.00
rate of interest	r	25.00%
number of years	n	6
Annual Compounding	frequency	1
Future value	FV	To be calculated

We need to solve the following equation to arrive at the required FV

So at time 6 the payment will be $3997.80

jeff jeffy answered 1 year ago

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