Question

Help needed.
A debt of $1300 due in 2 years and $1300 due in 5 years is to be repaid by a single payment now. Find out how much the payment is, if the interest rate is 6% compounded monthly.

Answer 1

do u have the answer so i need to explain, or do you need the answer?

Answer 2

I need the answer.

Answer 3

\[FV = PV(1+\frac{r}{n})^{nt}\]\[PV = FV(1+\frac{r}{n})^{-nt}\]

PV of $1300 due in 2 years at 6% monthly interest:
\[PV = 1300(1+\frac{0.06}{12})^{-12*2}=\]

PV of $1300 due in 5 years, same terms:
\[PV = 1300(1+\frac{0.06}{12})^{-12*5}=\]

Those future payments are worth a bit more than $2000 today.