Question 1193158: A payment of $2,830 is due in 60 days and another payment of $4,820 is due in 285 days. Calculate the single equivalent payment to be made in 65 days to settle the two payments if money earns 2.82% p.a. (Hint: use 65 days from now as the focal date.)
Answer by CPhill(1959)   (Show Source):
You can put this solution on YOUR website! **1. Determine the Time Differences:**
* **Payment 1:** Due in 60 days, so it's 60 - 65 = -5 days before the focal date.
* **Payment 2:** Due in 285 days, so it's 285 - 65 = 220 days after the focal date.
**2. Calculate the Present Value of Each Payment**
* **Present Value (PV) = Future Value / (1 + (Interest Rate / 365) * Number of Days)**
* **Payment 1:**
* PV1 = $2,830 / (1 + (0.0282 / 365) * -5)
* PV1 ≈ $2,836.11
* **Payment 2:**
* PV2 = $4,820 / (1 + (0.0282 / 365) * 220)
* PV2 ≈ $4,624.43
**3. Calculate the Single Equivalent Payment**
* Single Equivalent Payment = PV1 + PV2
* Single Equivalent Payment = $2,836.11 + $4,624.43
* Single Equivalent Payment = $7,460.54
**Therefore, the single equivalent payment to be made in 65 days to settle the two payments is approximately $7,460.54.**
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