Finance maths
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jonah2.0
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Beer soaked ramblings follow.
Equations of value involving simple interest.
Interest (Payment)
Genie owes $3 000 in 4 months with simple interest at 8% and another $4 000 is due in 10 months with simple interest at 7%. These two debts are to be replaced with a single payment due in 8 months. Determine the value of the single payment if the money is worth 6.5% simple interest. (I'm stuck...
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Let the equal payments be x.
From the perspective of 6 months from today work out the value of the loan and the total value of the two payments (6 months, the focal date):
(a) work out the value of today's 13000 [in 6 months from now it is worth 13000(1+0.035/2) ]
(b) work out the values of the 2 payments 6 months from now: today's payment of x is worth (1+0.035/2)x in 6 months' time, and the 6 month payment of x is obviously worth x (then).
Put the total in (a) equal to the total in (b) and work out x.
From the perspective of 6 months from today work out the value of the loan and the total value of the two payments (6 months, the focal date):
(a) work out the value of today's 13000 [in 6 months from now it is worth 13000(1+0.035/2) ]
(b) work out the values of the 2 payments 6 months from now: today's payment of x is worth (1+0.035/2)x in 6 months' time, and the 6 month payment of x is obviously worth x (then).
Put the total in (a) equal to the total in (b) and work out x.