Asked by Bijeta Pradhan on Apr 28, 2024
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Miquel was supposed to make three payments of $2,000 each-the first one year ago, the second one year from now, and the third three years from now. He missed the first payment and proposes to pay $3,000 today and a second amount in two years. If money can earn 4.5% compounded semi-annually, what must the second payment be to make the proposed payments equivalent to the scheduled payments?
Compounded Semi-annually
Interest on an investment is calculated twice a year and added to the principal, allowing the investment to grow faster than if it were compounded annually.
Proposed Payments
Suggested or planned amounts to be paid as part of a financial agreement or loan repayment schedule.
Scheduled Payments
Predetermined payments made over a specified period of time as part of the terms of a loan or mortgage.
- Utilize the concept of time value of money to assess streams of payments and the results of investments.
- Ascertain the financial parity among diverse payment plans across fluctuating interest rates.
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Learning Objectives
- Utilize the concept of time value of money to assess streams of payments and the results of investments.
- Ascertain the financial parity among diverse payment plans across fluctuating interest rates.
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