Three Payments of $2,000 (Originally Due Six Months Ago, Today

question 39

Short Answer

Three payments of $2,000 (originally due six months ago, today, and six months from now) have been renegotiated to two payments: $3,000 one month from now and a second payment due in four months. What must the second payment be for the replacement payments to be equivalent to the originally scheduled payments? Assume that money can earn an interest rate of 4%. Choose a focal date four months from now.

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