Question

debt payments of $800 due now and $1400 due in 5 months are to be repaid by a payment of $1000 in 3 months and a final payment in 8 months. calculate the size of the final payment if interest is 6%.

Answer 1

$1,304.70

Explanation:

If interest 6% annually, monthly is 0.5%.

The debt in 5 months will be 800 plus compounded interest for 5 months plus new due debt

`800(1.005)^5+1400=2220.201`

In 3 more months the debt will be 2220.201 plus compounded interest for 3 months minus payment

`2220.201(1.005)^3-1000=1253.67`

After 8 months the debt would be 1253.67 plus compounded interest for 8 months

`2220.201(1.005)^3=1304.70`

Then the size of the final payment would be $1,304.70