Question

Marilyn was supposed to pay $1,610 to Bernice on March 17. Some time later Marilyn paid Bernice an equivalent payment of $ allowing for a time value of money of 2.7% compounded monthly. When did Marilyn make the payment? (Do not round your intermediate celculations and round your answer to the nearest month.) Marvin made the payment_______ months later.

Answer 1

Marilyn made the payment after around 23 months.

Step-by-step explanation:

To calculate the time when Marilyn made the payment, we need to use the present value formula.

The present value formula is given by:

Present Value = Future Value / (1 + Interest Rate)^n

Here, we know the Future Value (equivalent payment) is $1,610 and the Interest Rate is 2.7% compounded monthly.

Let's assume the number of months Marilyn made the payment after March 17 is n.

So, the present value formula becomes:

$1,610 = $Future Value / (1 + 0.027/12)^n

Solving for n, we find that Marilyn made the payment after around 23 months.