Asked by Matthew Demilio on Jul 15, 2024
Verified
Daniel makes annual payments of $2,000 to the former owner of a residential lot that he purchased a few years ago. At the time of the fourth from last payment, Daniel asks for a payout figure that would immediately settle the debt. What amount should the payee be willing to accept instead of the last three payments, if money can earn 8.5% compounded semi-annually?
Compounded Semi-annually
Interest that is calculated and added to the account balance twice a year.
Annual Payments
Payments that are made once a year.
Payout Figure
The total amount paid out to a policyholder in an insurance claim or to an investor in dividends or withdrawals.
- Calculate the present value of a series of future payments or a future lump sum.
- Apply compound interest formulas to real-life financial scenarios.
- Calculate the amount of principal and interest in repayments.
Verified Answer
HB
Learning Objectives
- Calculate the present value of a series of future payments or a future lump sum.
- Apply compound interest formulas to real-life financial scenarios.
- Calculate the amount of principal and interest in repayments.