A borrower offers to repay a debt by making a payment following the following table: ...

 

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A borrower offers to repay a debt by making a payment following the following table: ΕΟΥ 10 1 2 3 4 payment amount $0 $600 $0 $2,700 $4,300 The bank would rather receive the money in 4 equal end-of-year payments. Assuming a TVOM of 5%, how much would the debtor need to pay to make these cash flows equivalent? A borrower offers to repay a debt by making a payment following the following table: ΕΟΥ 10 1 2 3 4 payment amount $0 $600 $0 $2,700 $4,300 The bank would rather receive the money in 4 equal end-of-year payments. Assuming a TVOM of 5%, how much would the debtor need to pay to make these cash flows equivalent?

Answer rating: 100% (QA)

To find the present value of the uneven cash flows we can discount each payment back to year 0 using ... View the full answer