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4. Suppose you have borrowed an amount of money today. It will be repaid with $1000 in one year, $2000 in two years and $3000 in three years. Assume the interest rate is d(4) = 0.15 a. You enter into an agreement with the bank to replace these payments with a single payment of $X at time 1.5 years. What is $X? b. Alternatively, you could enter into an agreement with the bank to replace the original payments with a single payment of $6000 at time t years. What is t?

4. Suppose you have borrowed an amount of money today. It will be repaid with $1000 in one year, $2000 in two years and $3000 in three years. Assume the interest rate is d(4) = 0.15 a. You enter into an agreement with the bank to replace these payments with a single payment of $X at time 1.5 years. What is $X? b. Alternatively, you could enter into an agreement with the bank to replace the original payments with a single payment of $6000 at time t years. What is t?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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4. Suppose you have borrowed an amount of money today. It will be repaid with $1000 in one year, $2000 in two years and $3000 in three years. Assume the interest rate is d(4) = 0.15 a. You enter into an agreement with the bank to replace these payments with a single payment of $X at time 1.5 years. What is $X? b. Alternatively, you could enter into an agreement with the bank to replace the original payments with a single payment of $6000 at time t years. What is t?
Transcribed Image Text:4. Suppose you have borrowed an amount of money today. It will be repaid with $1000 in one year, $2000 in two years and $3000 in three years. Assume the interest rate is d(4) = 0.15 a. You enter into an agreement with the bank to replace these payments with a single payment of $X at time 1.5 years. What is $X? b. Alternatively, you could enter into an agreement with the bank to replace the original payments with a single payment of $6000 at time t years. What is t?
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