ECON 1202; Help (1 Viewer)

Jun 26, 2011
Hi guys,

I kinda need help with the equations of value that I learnt in the second week. This is the question:

A student has to make four payments of a debt. The first is due in 1 month, the second
and third in 6 months and the fourth in 12 months respectively. The first is half the size of
the second and twice the size of the third payment, while the first and the last payments
are the same.
If a student chooses to make repayments of $4,000 in 12 months and $8,000 immediately,
find the value of the first repayment using 6 months as your focal date. Interest rate is 7%
per annum compounded daily for the first 2 months, then 8% per annum compounded monthly for the following 4 months, and nominal rate of 10% continuously compounded
for the rest of the year. Assume one month is equal to 30 days.


^That's the answer. I wanna know the explanation for the RHS. Why the first payment is compounded, yet the second and third payments arent, and the last payment is compunded continuously

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