Ren currently owes $5000 to a friend who is charging him interest of 3.00%p.m. He is required to settle the loan with two equal payments one today and the other in 3 months. Calculate the size of the payments using 3 months as the focal date
To calculate the size of the payments, we need to find the total amount including interest and divide it into two equal payments.
First, let's calculate the interest for the 3-month period.
Interest = Principal * Rate * Time
= $5000 * 3.00/100 * 3/12
= $375
Now, let's add the interest to the principal to find the total amount.
Total Amount = Principal + Interest
= $5000 + $375
= $5375
To find the size of each payment, divide the total amount by 2 (since there are two equal payments).
Payment Amount = Total Amount / Number of Payments
= $5375 / 2
= $2687.50
Therefore, the size of each payment Ren needs to make is $2687.50.