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A loan of $5000 is taken out today. It is due with interest at j4 = 8% in 2 years. Instead, the borrower negotiates with the lender to pay $2500 in 1 year and $X in 3 years. If the lender can reinvest any payment at j₂ = 5%, what is the value of X? A. $3395.34 OB. $2493.59 OC. $3038.93 OD. $3581.68

A loan of $5000 is taken out today. It is due with interest at j4 = 8% in 2 years. Instead, the borrower negotiates with the lender to pay $2500 in 1 year and $X in 3 years. If the lender can reinvest any payment at j₂ = 5%, what is the value of X? A. $3395.34 OB. $2493.59 OC. $3038.93 OD. $3581.68

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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A loan of $5000 is taken out today. It is due with interest at j4 = 8% in 2 years. Instead, the borrower negotiates with the lender to pay $2500 in 1 year and $X in 3 years. If the lender can reinvest any payment at j₂ = 5%, what is the value of X? $3395.34 B. $2493.59 $3038.93 $3581.68
Transcribed Image Text:A loan of $5000 is taken out today. It is due with interest at j4 = 8% in 2 years. Instead, the borrower negotiates with the lender to pay $2500 in 1 year and $X in 3 years. If the lender can reinvest any payment at j₂ = 5%, what is the value of X? $3395.34 B. $2493.59 $3038.93 $3581.68
Q. 11. A loan of $5000 is taken out today. It is due with interest at j4 = 8% in 2 years. Instead, the borrower negotiates with the lender to pay $2500 in 1 year and $X in 3 years. If the lender can reinvest any payment at j2 = 5%, what is the value of X? Calculate the FV for 5000 for 2 years. That is the original debt (say A) The focal date is after 3 years. Draw the timeline. Calculate A's FV for 1 year (to the focal point) (say B) Calculate 2500's FV for 2 years (to the focal point) (say C) C+X=B and calculate X.
Transcribed Image Text:Q. 11. A loan of $5000 is taken out today. It is due with interest at j4 = 8% in 2 years. Instead, the borrower negotiates with the lender to pay $2500 in 1 year and $X in 3 years. If the lender can reinvest any payment at j2 = 5%, what is the value of X? Calculate the FV for 5000 for 2 years. That is the original debt (say A) The focal date is after 3 years. Draw the timeline. Calculate A's FV for 1 year (to the focal point) (say B) Calculate 2500's FV for 2 years (to the focal point) (say C) C+X=B and calculate X.
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