How much would the payment in six months from now

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Reference no: EM132782878

Problem 1: Maddy was scheduled to make payments of $5,000 in 1 ½ years from now, and $7,500 in 4 ½ years from now. She is proposing an alternative arrangement that would involve a payment in 6 months from now, followed by a payment of $11,500 in 3 ½ years from now. How much would the payment in 6 months from now need to be in order for the two streams to be economically equivalent? Assume that money can earn 3% compounded semi-annually. Hint: A timeline would be helpful.

Reference no: EM132782878

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