Reference no: EM132828288

Six months ago Old Dutch Foods purchased some new machinery for a new product line that they just developed. The supplier agreed to three payments on the machinery of $40,000 due today, $85,000 due in six months, and $75,000 due in 15 months. The new product line has not been as successful as initially planned, so Old Dutch Foods has proposed an alternative agreement involving three payments, each due at 3 months, 9 months, and 21 months. The second payment is to be double the first payment, and the last payment is to be double the second payment. If the supplier is agreeable to this and wants an interest rate of 8.55% compounded monthly, determine the payments required in the proposed agreement.

Louisa owns a furniture store and decided to help a friend out by allowing him to purchase $5,000 of furniture using her credit at 6.25% compounded semi-annually. The furniture loan is to be repaid in four years. However, after 2½ years Louisa can no longer have the loan outstanding and needs the money. Avco Financial has agreed to purchase the maturity amount of this loan from Louisa using a discount rate of 17.1% compounded monthly. If Louisa proceeds with selling the loan contract to Avco Financial, what sum of money can she expect to receive?

Franklin owes the following amounts to the same person: $16,000 due today, $11,500 due in 1¼ years, $17,000 due in 2¾ years, and $15,000 due in 4¼ years. He wants to make a single payment of $56,500 instead. Using an interest rate of 8% compounded quarterly, when should this payment be made?