Let me use the formula for compound interest.

A = P(1 +i)^n --------------(1)

where

A = amount of investment after n numbers of compounding.

P = principal or initial value of investment

i = periodic rate, or relative rate per compounding

n = number of compoundings.

a)How much will James have to pay in 2 years time to fully repay his debt if he pays $1,000 to-day & $4,000 1 year from now?

Today:

Debt due to the $5000 two years ago.

8% per annum compounding quarterly, so, i = 0.08/4 = 0.02

Two years ago, so, n = 2*4 = 8 compoundings.

A1 = 5000(1+0.02)^8 = $5858.30 today.

Debt due to the $3000 last year.

n = 1*4 = 4

A2 = 3000(1.02)^4 = $3247.30

So, total debt today = A1 +A2 = 5856.30 +3247.30 = $9105.60

Paying 1000 today,........ 9105.60 -1000 = $8105.60 balance

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After 1 year from today.

P = 8105.60

i = 0.02

n = 1*4 = 4

New debt = 8105.60(1.02)^4 = $8773.76

Paying 4000,........... 8773.76 -4000 = $4773.76 new balance

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For final payment two years from today.

That is 1 year from next year.

P = 4773.76

i = 0.02

n = 1*4 = 4

Newer debt = 4773.76(1.02)^4 = $5167.27 ---------he's going to pay finally.

Therefore, James will have to pay the $8000 he owed a total of (1000 +4000 +5167.27) = $10,167.27 in two years from today. ------------answer.

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b) Use that formula?

Let me pass.