Pls answer both scenarios accurately for UPVOTE Scenario An uninsured patient wh
ID: 2809869 • Letter: P
Question
Pls answer both scenarios accurately for UPVOTE
Scenario An uninsured patient who underwent emergency surgery at Memorial Hospital owes $10,000 for the services that he received. Because he will be unable to work during his recovery, the patient has requested that the hospital not pursue collecting the $10,000 for a period of 1 year, after which time he will pay the hospital in full in a single lump sum. Memorial Hospital has a strong cash position and, given the patient's medical and financial situation, it would prefer to avoid putting his account into collections. As such, the hospital is actively considering the patient's request. in order to determine what amount the patient would need to pay in 1 year's time so that the hospital would not be losing any money on the delayed payment, Memorial Hospital's billing unit has calculated the future value of the $10,000 that the patient owes. Their calculation is based on an interest rate of 6%, which reflects an average of the current rates on the market that the hospital could expect to earn were it to have the $10,000 available to invest today, rather than having to wait for the patient to make the payment in 1 year's time. What did the hospital's billing unit determine the future value of the $10,000 owed would be?Explanation / Answer
Scenario 1 :
The uninsured person has requested the Memorial hospital billing unit to repay $10,000 after a period of 1 year. However, the hospital has decided to accept the person's request but is not willing to compromise on any delayed payment.Henceforth, the hospital has decided to grant the request at an interest rate of 6% so that they do not lose on theor opportunity cost.
Therefore, Principal loan amount to the insured P = $10,000
Interest rate for future value amount r= 6%
TIme period requested by the uninsured t = 1 year
Future value (FV) = P*(1+r)t
= 10000*(1+0.06)1
= 10000*1.06
= $10600
Ths, based on a 6% interest rate for 1 year time period, the billing unit has determined a value of $10600 to be owed.
b) Scenario 2
In scenario 2, the uninsured has proposed to to give $10700 lumpsum at the end of 1 year- time period. We will determine the present value of this amount at a discount rate of 6% and if the present value is greater or equal to $10000 then it is financially advisable to go ahead with the proposal.
Here, Future value FV = $10700
Interest rate r = 6%
Time Period t = 1 year
Present Value PV = FV/(1+r)1
= 10700/(1+0.06)1
= 10700/1.06
= $10094.34
Thus, the hospital unit has determined the present value of the future payment of $10700 to be $10094.34 and can go ahead with the proposal.