Question

Merina is scheduled to make two loan payments to Bradford in the amount of $1,000 each, two months and nine months from now. Merina doesn't think she can make those payments and offers Bradford an alternative plan where she will pay two equal amounts seven months from now followed by another equal payment seven months later. Bradford determines that 8.5% is a fair interest rate. Using the second unknown equal payment as your focal date, what are the equal payments?

Answer 1

well, we're assuming all along that Merina owes Bradford $2000, because in the 1st scenario, she was going to pay twice $1000.

on the 2nd scenario, she'll be paying the same $2000 but split 7 months from now and then 7 months later, same 2000 bucks, at which point Bradford applied 8.5% interest.

using those assumptions, since the wording is not quite clear, we can say that Merina is simply paying 2000 bucks plus the 8.5%

`\begin{array} \cline{1-1} \textit{a\% of b}\\ \cline{1-1} \\ \left( \cfrac{a}{100} \right)\cdot b \\\\ \cline{1-1} \end{array}~\hspace{5em}\stackrel{\textit{8.5\% of 2000}}{\left( \cfrac{8.5}{100} \right)2000}\implies 170 \\\\[-0.35em] ~\dotfill\\\\ \cfrac{\stackrel{principal}{2000}~~ + ~~\stackrel{interest}{170}}{2}\implies \stackrel{\textit{two equal payments of}}{1085}`