Semi-annually payment question

Question

You owe $9000 payable 4 years from now. What alternative amount should your creditor be willing to accept today if the money can earn 4.8% compounded semi-annually?

Answer 1

A=P(1+i)ⁿ is the equation of compounding semi-annually

A= amount of money

P= principal

i= interest rate

n= number of times the money is compounded

P= $9,000

i=4.8%

n= 2( how many times per year) x (number of years) 4

n=8

now since you'll be paying an interest rate semi-annually (4.8% per year) you'll need to divide 4.8 by 2

and covert the percentage to a decimal

2.4%= .024

Finally, we can solve for A

A= 9,000(1+0.24)⁸

=9,000 x 1.024⁸

= a total amount of 10,880.33

So, according to forbes.com, a creditor will generally accept 40%-50% of the remaining balance, which is about half. However, I also read they will take anywhere from 30%-80%. So, here are all the percentages of the total dollar amount (roughly)

10%= 1,100

20%= 2,200

30%= 3,300

40%= 4,400

50%= 5,500

60%=6528.20

70% = 8,000

80%= 9,000

hopefully this helped