Question
In return for a promise to receive $600 at the end of 8 years, Jim agrees to pay $100 at once, $200 at the end
In return for a promise to receive $600 at the end of 8 years, Jim agrees to pay $100 at once, $200 at the end of 5 years, and to make further payment at the end of 10 years. 8% simple interest is charged for the first 5 years and 7.5% effective annual discount rate thereafter.
A). The equation of value to find the payment at the end of 10 years is ___.
B). If the focal point in (A) was changed to t=7, then the equation of value in (A) should be multiplied by ___.
C). What is the value of the payment at the end of 10 years?
D). Suppose the simple inetrest rate for the first 5 years increased to 8.5%. The value of the payment at time t=10 would be ___.
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