Payments of $400 Due Eight Months Ago and $650 Due

question 53

Short Answer

Payments of $400 due eight months ago and $650 due three months ago were not made. Now the debtor is proposing to "make good" by two future payments that provide for a 7.5% compounded monthly rate of return to the creditor on the missed payments. The first payment will be made in two months. The second payment, twice as large as the first, will be made in seven months. Determine the amount of each payment.

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Definitions:

Personal Guarantee

This is a legal promise made by an individual to repay the borrowing of a business entity in case it fails to do so, thus personally ensuring the debt.

Economic Performance

Economic performance refers to the evaluation of how effectively an economy or a specific entity manages its resources and meets its objectives, often measured in terms of productivity, efficiency, and growth.

Informational Needs

The specific data and insights required by individuals or organizations to make informed decisions.

Financial Accounting Standards Board

An independent, private-sector body that establishes and interprets Generally Accepted Accounting Principles (GAAP) in the United States.