A girl has a 2000 overdue debt for books the local

Reference no: EM13590920

A girl has a $2,000 overdue debt for books the local bookstore. She has only $600 in her checking account. The bookstore manager tells her that she may settle the account in one of two ways since she can't pay it all now:

1. Pay $600 now and $750 at the end of each of the next two years.

2. Pay $ 1,000 at the end of each of the next two years.

Assuming that the cost of money is the only factor in girl's decision and that the cost of money to her is 12% per year. The bookstore is going to compound the interest quarterly. Which alternative should she choose?

Reference no: EM13590920

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