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.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

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