You are given two options to settle a loan. Option A requires you to pay $1,250 in 7 months and $1,450 in 5 years 3 months. Option B requires you to make a payment in 2 years 3 months and a finaly $700 payment in 4 years 5 months. If money earns 4.70% compounded monthly, calculate how large Option B's payment in 2 years 3 months needs to be for the two options to be equivalent. Please include a well-labelled timeline diagram. Use 2 years 3 months as the focal date.
You are given two options to settle a loan. Option A requires you to pay $1,250 in 7 months and $1,450 in 5 years 3 months. Option B requires you to make a payment in 2 years 3 months and a finaly $700 payment in 4 years 5 months. If money earns 4.70% compounded monthly, calculate how large Option B's payment in 2 years 3 months needs to be for the two options to be equivalent. Please include a well-labelled timeline diagram. Use 2 years 3 months as the focal date.
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
Problem 1PS
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Question
![You are given two options to settle a loan.
Option A requires you to pay $1,250 in 7 months and $1,450 in 5 years 3 months.
Option B requires you to make a payment in 2 years 3 months and a finaly $700
payment in 4 years 5 months.
If money earns 4.70% compounded monthly, calculate how large Option B's payment
in 2 years 3 months needs to be for the two options to be equivalent.
Please include a well-labelled timeline diagram. Use 2 years 3 months as the focal
date.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe6709abe-0521-4015-83ca-b22852e825c6%2Ff86e6d06-7908-47e8-9b4c-61881aee4f04%2F9om500i_processed.jpeg&w=3840&q=75)
Transcribed Image Text:You are given two options to settle a loan.
Option A requires you to pay $1,250 in 7 months and $1,450 in 5 years 3 months.
Option B requires you to make a payment in 2 years 3 months and a finaly $700
payment in 4 years 5 months.
If money earns 4.70% compounded monthly, calculate how large Option B's payment
in 2 years 3 months needs to be for the two options to be equivalent.
Please include a well-labelled timeline diagram. Use 2 years 3 months as the focal
date.
![If money earns 4.70% compounded monthly, calculate how large Option B's payment
in 2 years 3 months needs to be for the two options to be equivalent.
Please include a well-labelled timeline diagram. Use 2 years 3 months as the focal
date.
Full solutions should be shown on separate sheets of paper.
Round to nearest cent](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe6709abe-0521-4015-83ca-b22852e825c6%2Ff86e6d06-7908-47e8-9b4c-61881aee4f04%2Fpveqz6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:If money earns 4.70% compounded monthly, calculate how large Option B's payment
in 2 years 3 months needs to be for the two options to be equivalent.
Please include a well-labelled timeline diagram. Use 2 years 3 months as the focal
date.
Full solutions should be shown on separate sheets of paper.
Round to nearest cent
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