I feel like this should be simple (Finance question)

SccHarpGirl · 10-04-2006, 05:51 PM

Okay, this is one part of a larger case study, that I think should be obvious but I'm missing it for some reason.

The part I'm unsure about is this:

The person has significant debt which the problem states should be repaid "As soon as mathematically possible". His disposable income to pay off debt is increasing as he works his way up through the company.

The debt is growing at a rate of 8% annually
Investing the money is at a rate of 11% annually.

To insure fastest payoff of the debt, what percentage should be invested and what percentage should be spent paying off the debt?

SccHarpGirl · 10-04-2006, 05:53 PM

d'oh...wouldn't it be fastest to invest all the money and then make a balloon payment to pay off the debt once the target amount is reached? I know that's not realistic but hey, the problem just stated that debt should be paid off as fast as possible, not in a realistic manner