Three options for buying the furniture

Assignment Help Financial Management

Reference no: EM131464461

A couple wants to buy $3,000 worth of furniture. They have three options for buying the furniture. Money used for down payments or monthly payments would have earned 4% annual interest compounded quarterly.

Which of the three options is “best”? Notice that each option has a present worth of $3,000. However, because of the different payment scenarios, the future worth of each may be different.

The first option is put 20% down, and obtain a 5-yr (monthly payment) personal loan from their bank at 14% yearly interest (compounded monthly) for the remainder.

The second option is to put down a 1/3 payment at the time of purchase and no payments required for six months. If you pay it off within the six months, no interest payments, otherwise the accrued interest is tacked on to the unpaid balance. Thereafter, the amount is paid off in 54 equal monthly payments. The interest rate is 19.6% (compounded monthly).

The third option is to use their Discover Card with a 13.9% interest (compounded daily) payable over five years.

Reference no: EM131464461

Questions Cloud

What should the price of the stock : The current price of a stock is $75.51. the required rate of return is 6%, then what should the price of the stock be in 5 years when you plan to sell it?

Effective costs of trade credit to non discount customers : Grunewald Industries sells on terms of 1/10, net 30. What are the nominal and effective costs of trade credit to Grunewald's non discount customers?

United states when they convert their dollars to pound : United States when they convert their dollars to pound, is the dollar undervalued or overvalued.

Describes a financial fraud case : describes a financial fraud case., what role finance has in your life, and what you hope to learn in this class. Summarize key points in the article you found.

Three options for buying the furniture : They have three options for buying the furniture. Money used for down payments or monthly payments would have earned 4% annual interest compounded quarterly.

Company plans to purchase new equipment to improve : Company plans to purchase a new equipment to improve its productivity for next 3 years. What is the monthly payment and what is the final total cost to company.

Promote technology in education : You are a new PR intern at Apple. Apple is donating 200 iPads to a local inner-city school to promote technology in education

The subprime auto loan unit : Calvin is the director of the subprime auto loan unit of a large regional bank. What recommendations can you make to Calvin so he would have less concern about

Determining portfolio weights : Determining Portfolio Weights.

User Account

All Pages