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Math Help - Present , future value

  1. #1
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    Angry Present , future value

    Payments of $1000 and $7500 were originally scheduled to be paid five months ago and four months from now , respectively. The first payment was not made. What payment two months from now is equivalent to the scheduled payments if money can earn 6 1/4% ?

    if the first step is to find the pv then

    S = 7500
    P =
    R = 0.0625
    T = 4/12

    7500 = P ( 1 + 0.0625 * 4/12 )

    7500 = 1.02083P

    P = 7346.94p

    From there i'm puzzeled on what i should do
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  2. #2
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    Quote Originally Posted by diehardmath4 View Post
    Payments of $1000 and $7500 were originally scheduled to be paid five months ago and four months from now , respectively. The first payment was not made. What payment two months from now is equivalent to the scheduled payments if money can earn 6 1/4% ?

    if the first step is to find the pv then

    S = 7500
    P =
    R = 0.0625
    T = 4/12

    7500 = P ( 1 + 0.0625 * 4/12 )

    7500 = 1.02083P

    P = 7346.94p

    From there i'm puzzeled on what i should do
    Are you supposed to be using Simple Interest?

    You do NOT need the PRESENT Value. You need the value at the time of the payment.

    Present Value
    $1000 @ -5
    $7500 @ +4

    Value When Due (two months later)
    $1000 @ -7
    $7500 @ +2

    Now add them up. $1000(1 + 0.0625*(7/12)) + $7500(1 - 0.0625*(2/15))

    This is Simple Interest. Other assumptions will produce other values.
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