Joe must pay liabilities of 2000 due one year from now and another 1000 due two years from now. He exactly matches his liabilities with the following two investments: Mortgage I: A one year mortgage in which X is lent. It is repaid with a single payment at time one. The annual effective interest rate is 6%. Mortgage II: A two-year mortgage in which Y is lent. It is repaid with two equal annual payments. The annual effective interest rate is 7%. Calculate X + Y.
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Home » Business » Joe must pay liabilities of 2000 due one year from now and another 1000 due two years from now. He exactly matches his liabilities with the following two investments: Mortgage I: A one year mortgage in which X is lent.