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Scheduled payments of 1288$ due two years ago and 708$ due in six years are to...

Scheduled payments of 1288$ due two years ago and 708$ due in six years are to be replace by two equal payments. The first replacement payment is due in one year and the second payment is due in nine years. Determine the size of the two replacement payments if interest is 7.5% compounded monthly and the focal date is one year from now.

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Answer #1

Payment $1288 is due in two years from now and $708 in six years.

First replaced payment is in one year and second same replaced payment is in nine years.

Focal date is one year from now.

Monthly interest rate will be (7.5%/12) = 0.625%.

Total value of original payments after 1 year must be equal to total value of replaced payments.

New payment is 1140.23 (rounded off).

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