A payment of $5000 that was due 20 days ago and another payment of $4000 that is due 50 days from now are to be settled/replaced by a payment of $6000 today and a payment of $X 90-days from today.If r = 11%,what is the value of X using today as the focal date?
A)$3051.33
B)$3008.81
C)$3001.67
D)$2892.31

Question

Quizplus · Accepted Answer

The correct answer is A. The present value of the two payments is $5000/(1.11^(20/360)) + $4000/(1.11^(50/360)) = $5000/1.05 + $4000/1.12 = $4761.90 + $3571.43 = $8333.33. The present value of the two new payments is $6000 + $X/(1.11^(90/360)) = $6000 + $X/1.15 = $8333.33. Therefore, $X = $8333.33 - $6000 = $2333.33.

A Payment of $5000 That Was Due 20 Days Ago