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 answer is "$20906.15".

Step-by-step explanation:

In the next five years, Mr. Rafiq must be due to 7000 Ahmed and in
`7 (1)/(2)` years Rs. 15000 must be due.

Interest r = 8% semi-annually aggregated

Hence a one-off fee only at end of 6 years is an FV fee at 5 years plus a
`7 (1)/(2)` year payment.

`\to`Year 6 single payment
`= CF5 * (1+(r)/(2))^((2 * 1)) + (CF6)/((1+(r)/(2))^((2* 1.5)))`

`\to` Payment at year 6
`= 7000 * {(1+(0.08)/(2))}^2 + (15000)/((1+(0.08)/(2))^3 )`

`= \$ \ 20906.15`