Question

Jenny plans to pay off a debt by payment of $3000.00 fifteen months from now, $4000.00 eighteen months from now, and $5000.00 thirty months from now. Determine the single payment now that would settle the debt if money is worth 4.2% per year compounded monthly. (Round your answer to the nearest cents)

Answer 1

Present Value of 3000 today = Future Value / (1+r)^n

r = 0.042 / 12 = 0.0035

n = 15

Present Value of 3000 today = 3000 / (1+0.0035)^15

= 2846.82389424

Present Value of 4000 today = Future Value / (1+r)^n

r = 0.042 / 12 = 0.0035

n = 18

Present Value of 4000 today = 4000 / (1+0.0035)^18

= 3756.18702756

Present Value of 5000 today = Future Value / (1+r)^n

r = 0.042 / 12 = 0.0035

n = 30

Present Value of 5000 today = 5000 / (1+0.0035)^30

= 4502.44793605

single Payment = Present Value of alll payments

= 2846.82389424 + 3756.18702756 + 4502.44793605

  =$11105.46