Which method of getting tv is cheaper in present value terms

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Reference no: EM131814640

You want to purchase a big-screen TV for $2000.

You can purchase the TV with your credit card that charges 15% APR (compounded monthly) and make 36 monthly payments. The first payment is one month from now.

Alternatively, you can go to a “rent to own” store and rent the TV and pay $65 per month for 36 months at which time you would own the TV. The first payment is one month from now.

If your savings account earns 4% APR (compounded monthly), which method of getting the TV is cheaper in present value terms and by how much?

Reference no: EM131814640

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