Asked by Tiffany Santo on May 16, 2024
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Scheduled payments of $3,000 due today and $2,000 due in 15 months are to be replaced by two payments-$1,500 due in 15 months and a second payment of undetermined size due in 24 months. What must the second payment be for the two streams to be economically equivalent? Assume that money can earn 6% compounded quarterly.
Economically Equivalent
Economically equivalent means having the same financial value or cost, despite possibly differing in form or method.
- Harness the time value of money to analyze payment streams and assess investment outcomes.
- Assess the financial comparability of different payment strategies subjected to varying interest rates.
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Learning Objectives
- Harness the time value of money to analyze payment streams and assess investment outcomes.
- Assess the financial comparability of different payment strategies subjected to varying interest rates.