A person has debts of $500 due in three years with interest at 5% compounded monthly and $500 due in 4 yrs with interest at 6% compounded semiannually. The debtor wants to pay off these debts by making two payments: the first payment now and the second , which is double the first payment, at the end of the third year. If money is worth 7% compounded annually, how much is the first payment?

Question

A person has debts of $500 due in three years with interest at 5% compounded monthly and $500 due in 4 yrs with interest at 6% compounded semiannually.  The debtor wants to pay off these debts by making two payments: the first payment now and the second , which is double the first payment, at the end of the third year.  If money is worth 7% compounded annually, how much is the first payment?

anonymous · Answer

((500-x)*1.05^36+500*1.06^6)*0.93=2x       where x is the first payment
x=476.865

anonymous · Answer

The answer is $314 (in the back of the book)... I keep coming up w the same answer (or similar) as you... Thanks for the assist.