Question

Scheduled payments of $357, $1108, and $861 are due in one-and-a-half years, four years, and five-and-a-half years respectively. What is the equivalent single replacement payment two years from now if interest is 6% compounded semi-annually?

n 3
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The equivalent single replacement payment is $
(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed)

Answer 1

To find the equivalent single replacement payment two years from now, we can use the concept of compound interest. The formula for compound interest is given by: A = P(1 + r/n)^nt where: A is the future value, P is the present value, r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the number of years. In this case, the present values are $357, $1108, and $861, the time periods are 1.5 years, 4 years, and 5.5 years, and the interest is 6% compounded semi-annually. We need to find the future value after 2 years. Using the formula, we can calculate the equivalent single replacement payment two years from now.

Step-by-step explanation:

To find the equivalent single replacement payment two years from now, we can use the concept of compound interest. The formula for compound interest is given by:

A = P(1 + r/n)nt

where:

• A is the future value
• P is the present value
• r is the annual interest rate
• n is the number of times the interest is compounded per year
• t is the number of years

In this case, the present values are $357, $1108, and $861, the time periods are 1.5 years, 4 years, and 5.5 years, and the interest is 6% compounded semi-annually. We need to find the future value after 2 years. Using the formula, we can calculate the equivalent single replacement payment two years from now.