the following seris of payments will repay a prestent sum of $5000 at an 8% intrest rate using single payment factors, what presnt sum is equivlent to this series of payments at a 10% intrest rate?

Year -------------------------End of year payment
1-----------------------------$1400
2 -----------------------------1320
3 ------------------------------1240
4 ------------------------------1160
5 -------------------------------1080


please if any can help me in gettin this solved , as i cant get wat the question wants , needed urgently thanxxx aloott guyss

wismer321

I do not know if this is correct, but I figure $5100. At 10% interest you get the payments of $1610, 1400, 1300, 1200, and $1100. I do not know if that is what is meant by "equivlent to this series of payments " or not. I got this from taking the extra 2% (10%-8%) and mutiplying that by $5000, getting $100. Added that to the original $5000 for a present sum of $5100. Using that I did the math, 5100 x .10 = 510 5100 + 510 = 5610 following the logic in the first example (5000 x .08 = 400 5000 + 400 = 5400 with a 1400 payment 5400 - 1400 = 4000 4000 x .08 = 320 4000 + 320 = 4320 with the 1320 payment 4320 - 1320 = 3000 3000 x .08 = 240 3000 + 240 = 3240 with a paymetn of 1240 3240 - 1240 = 2000 and so on) I took 5100 x .10 = 510 5000 + 510 = 5610 with a payment of 1610 5610 - 1610 - 4000 and so on. The logic seems to be that the interest earned plus $1000 is the payment to take at the end of the year. That, after 5 years (payments) takes the balance to zero.
I ope this made sense. If not, post back and I can try again. I can get wordy at times. )

hussein_hikmat

dude , in the solution the answer was 4758, i dunno how it came to this , well if can try once more i did ur way and it was wrong ... thanxx dude again