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I am having trouble understanding the solution and why I keep getting a diffirent answer. here it isenter image description here

enter image description here

I am confused about why the '$Y$' in the time line are above 5 and 6.when it says she pays back at the end of the fifth year and end of sixth year, doesn't this imply that the $Y$ should be over the $6$ and over the $7$?

Because then I get Y=$10170$

So can anyone help me understand what I am missing?

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    There only flaw I see in the graph is that the fourth year is not part of the timeline, which is bad enough, – 2017-01-29

1 Answers 1

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I guess it is just notation: look where the 8500 is places: it is bellow zero, meaning that we consider that person x lends person y 8500 at the beginning of year one (so the end of year 0). Therefore thé Y are above 5 and 6.

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    He lends her 1500 in five years, it says, which is in the same position as the Y which is supposed to be at the end of five years? – 2017-01-28
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    Since he lends her the 8500 at the beginning of year one, then 3 years later is the beginning of year 4... This agrees with thé given solutions since she pays two years interest in the 5000 and zero interest in the 1500, since she gets this money at thé end of year 5 – 2017-01-28
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    Sometimes the way the question is formulated is harder than the solution itself :) – 2017-01-28