We need to equate the total payments to the total obligations due at the end of year three. Debts The values of the R780 and R7 000 debts must be moved to the end of year three. For the R780 debt The future value is = P (1 + R) T S = 780 (1 + 0.11) 1 S = 865.80 For the R7 000 debt The value of the R7 000 debt at the end of year three is = P (1 + R) -T S = 7000 (1 + 0.11) -1 S = R6 306.31 Payments There are two payments, namely R1 300 at the end of year one and R x at the end of year three. For the R1 300 payment The future value isS = P (1 + R) T S = 1300 (1 + 0.11) 2 S = R1 601.73Total payments = Total obligations1601.73 + x = 865.80 + 6306.611601.73 + x = 7172.11 x = 7172.11 – 1601.73x = R5 570.38
