Question

Three debts, the first for $1720 due four months ago, the second for $1315 due in 5 months, and the third for $1640 due in 7 months, are to be paid by a single payment today. How much is the single payment if money is worth 7.5% p.a. and the agreed focal date is today?

Answer 1

To calculate the single payment required to pay off the three debts, we can use the present value formula. The present value of each debt can be calculated using the formula: Present Value = Future Value / (1 + Interest Rate)^Number of periods. Adding up these present values gives us the total single payment required.

Step-by-step explanation:

To calculate the single payment required to pay off the three debts, we can use the present value formula. The present value of each debt can be calculated using the formula:

Present Value = Future Value / (1 + Interest Rate)Number of periods

For the first debt, the present value is $1720 / (1 + 0.075)4 = $1496.51. For the second debt, the present value is $1315 / (1 + 0.075)5 = $1132.28. And for the third debt, the present value is $1640 / (1 + 0.075)7 = $1343.94. Adding up these present values gives us the total single payment required: $1496.51 + $1132.28 + $1343.94 = $3972.73.