What is the net cost today of the cheapest option

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You have just started your first job and you want to have the basic appliances (fridge, washer, dryer, etc.) in your apartment. You face the following choices:

(i) Purchase all appliances at the store using a bank loan. There is no down payment as the bank can take your appliances if you default on the loan. The loan is at the annual market rate of 6%, and the loan amount is $5,300 to be repaid monthly over 4 years.

(ii) Rent-to-buy from the same store. The monthly rental is $110 for 48 months and then you pay $800 to own all the appliances. What is the net cost today of the cheapest option?

Reference no: EM132068321

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