Question

$800 is due at the end of 4 years and $700 at the end of 8 years. If money is worth j_12 = 3%, determine an equivalent single amount at

(a) the end of 2 years;

(b) at the end of 6 years;

(c) the end of 10 years.

note：j_m is the nominal rate of interest compounding m times per year.

Answer 1

Answers.

a) $1338.29

b) $1508.69

c) $1700.78

First, we will find j, that is, j effective rate of interest per annum (j= 3.0415%).

Then, we will use this rate j to the present or future values.

V=1/(1+j)=(1+j)^(-1)