Question

Mr. Rafiq owes Mr. Ahmed Rs. 7000 to be due in 5 years and Rs. 15,000 to be due in 7 ½ years. How much should Mr. Rafiq pay at the end of 6 years which may be acceptable to Mr. Ahmed if money is worth 8% compounded semi-annually?

Answer 1

The correct response is "$20906.15".

Step-by-step explanation:

Mr. Rafiq assigns Rs. 7000 should Mr. Ahmed to have been attributable throughout five years as well as Rs. 15000 to have been expected within seven and a half years.

Interest rate is,

r = 8%

Therefore at that age of 6 years, every single transaction becoming FV with payment after five years probably PV of compensation at 7 ½ years.

Now,

At year 6, the single payment will be:

=
`CF5* (1+(r)/(2))^(2* 1) + (CF6)/((1+(r)/(2))^){2* 1.5}`

At year 6, the payment will be:

=
`7000* (1+(0.08)/(2) )^2 + (15000)/((1+(0.08)/(2))^2)`

=
`20906.15` ($)