Debt payments of $2,450 and $1,900 are due in five months and ten months, respectively. What single payment is required to settle both debts in one month? Assume a simple interest rate of 7.50% p.a. and use one month from now as the focal date.

Debt payments of $2,450 and $1,900 are due in five months and ten months, respectively. What single payment is required to settle both debts in one month? Assume a simple interest rate of 7.50% p.a. and use one month from now 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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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Debt payments of $2,450 and $1,900 are due in five months and ten months,
respectively. What single payment is required to settle both debts in one month?
Assume a simple interest rate of 7.50% p.a. and use one month from now as the focal
date.

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