Calculate the equivalent value

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Reference no: EM133638004

Question

Jason was supposed to make a payment of $4,250 in 2 years and another payment for $1,700 in 4 years to Loon Company as part of a payment plan.

Instead, he is trying to reach an agreement with the company where he would pay an upfront amount now, and an amount of $1,900 in 4 years. Assume that money is worth 3.84% compounded quarterly.

a. Calculate the equivalent value of the $4,250 payment and the $1,700 payment today.

b. Calculate the upfront amount that he should pay under the alternative payment agreement so that the payments are equivalent.

Reference no: EM133638004

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