The principal plus interest at 10% compounded quarterly on a $15,000 loan made 2½ years ago is due in two years. The debtor is proposing to settle the debt by a payment of $5,000 today and a second payment in one year that will place the lender in an equivalent financial position, given that money can now earn only 6% compounded semi-annually.
a) What should be the amount of the second payment?
b) Demonstrate that the lender will be in the same financial position 2 years from now with either repayment alternative.

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The Answer of The principal plus interest at 10% compounded quarterly on a $15,000 loan made 2½ years ago is due in two years. The debtor is proposing to settle the debt by a payment of $5,000 today and a second payment in one year that will place the lender in an equivalent financial position, given that money can now earn only 6% compounded semi-annually.
a) What should be the amount of the second payment?
b) Demonstrate that the lender will be in the same financial position 2 years from now with either repayment alternative.

The Principal Plus Interest at 10% Compounded Quarterly on a $15,000