Q7.5 B8

Q7.5 B8

1. Bring everything to the focal date, which is 92 days from today.

2. There are two debts which have to be settled, 4000 and 6000

3. This is a future value problem, because all the transactions are in the future.

4. Let’s calculate the debts first. On the focal date you will owe a total of:
4000(1+0.083*292/365) + 6000(1+0.083*155/365)=4265.6 + 6211.48 = 10477.08

5. Today, you credited your account with 5000. That amount will increase until the focal date to 5000(1+0.083*92/365)=5104.6.

6. What you owe on the focal date will be the difference between these: 10477.08-5104.6 = 5372.48

NOTE: it is also possible to calculate the future values of the 4000 and the 6000 as of today, subtract 5000, and then work out the future value of that balance. You’ll get exactly the same answer