A company owes $100,000 at the end of 1-month and another $200,000 at the end of 11-months.Instead,they wish to consolidate their loans and make one single payment of $X at the end of 6 months.It is agreed that the end of 5-months will be the focal date.If the interest is r = 12%,what is the value of X?
A)$295,476.19
B)$295,606.04
C)$300,000.00
D)$295,941.49

Question

Quizplus · Accepted Answer

Using the concept of time value of money and present value, we can find the value of X using the following formula:

X = (100,000/(1+0.12(1/12))^5) + (200,000/(1+0.12(11/12))^5)

X = (100,000/1.06)^5 + (200,000/1.12)^5

X = 89,147.17 + 206,458.87

X = 295,606.04

Therefore, the best choice is B.

A Company Owes $100,000 at the End of 1-Month and Another