Question

A finanical obligation requires the payment of $1000 in 2 months. $3000 in 8 months, and $4000 in 14 months. Instead, if a payment of $2000 is made now, when should a second payment of $6000 be made if interest is 9% compounded monthly ?

Answer 1

	Monthly interest rate =			9/12=	0.75
	Obligation -	Period	Amount	PV factor @ 0.75%
	2m	2	1000	0.998502	998.5017
	8m	6	3000	0.995512	2986.535
	14m	4	4000	0.997006	3988.022
					7973.06
	The payment should be made such that the PV of obligation = pv of payments
	7973.06	= 6000/(1.0075^t) +2000
	(1.0075^t) =	6000/(7973.06 -2000)
	(1.0075^t) =	1.00451
	Log(1.0075^t) =		Log(1.00451)
	t x Log(1.0075) =		Log(1.00451)
	t x 0.003245 =		0.001954
	t =		0.602273
	Therefore Next payment should be made in 0.6 month (approx)
	Please provide feedback…. Thanks in advance…. :-)