If you owe a debt of $1,000 today and also owe $2,000 in 24 months, what single payment could you make 15 months from today that would pay off both of these debts, if interest is assessed at 8% per year, compounded monthly?
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A. B. C. D. E.Explanation
To solve this question, set the problem up as the sum of two compound interest calculations. Move the $1,000 from today over to month 15 and add it to the
$2,000 brought back from month 24 to month 15. On the BAII Plus, press 15 N, 8 divide 12 = I/Y, 1000 PV, 0 PMT, CPT FV which yields $1,104.80. Then press
STO 1. Then press 9 N, 2000 FV, CPT PV, which yields $1,883.91. Finally press + RCL 1 = to see the answer. On the HP12C, press 15 n, 8 ENTER 12 divide i,
1000 PV, 0 PMT, FV. Then press STO 1. Then press 9 n, 2000 FV, PV. Finally press RCL 1 + to see the answer. Make sure the BAII Plus has the value of P/Y set to 1.