Two Payments of $2,000 Each Are Scheduled for Six Months

question 155

Short Answer

Two payments of $2,000 each are scheduled for six months from now and two years from now. They are to be re-scheduled as follows: a payment one year from now and a second payment, half the size of the first payment, three years from now. What must the amount of each payment be for the replacement stream to be equivalent to the originally scheduled stream? Assume that money can earn 7.8% compounded semi-annually.

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Definitions:

Family Therapy

A form of psychotherapy that involves all members of a nuclear or extended family and aims to address dysfunctional patterns and relationships within the family unit.

Cognitive Restructuring

Cognitive Restructuring is a psychological technique that aims to identify and challenge irrational or maladaptive thoughts and replace them with more rational or adaptive thoughts.

High Standards

Expectations or criteria that are significantly above the typical or average level, often challenging to meet or achieve.

Negative Beliefs

Thoughts or convictions that are pessimistic or unhelpful, often contributing to negative outcomes or mental health issues.