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$605
$9,285
$678
$8,317
$8,218
2. You plan on going on a 3 month vacation 8 months from now.
You can pay $4,500 per month during the vacation, or you can pay $13,000 today.
Which alternative should you take and how much does it save you in present value term if your investments earn 3.00% APR (compounded monthly)?
Pay each month when you get there, you will save $433
Pay today you will save $200
Pay today you will save $433
Pay each month when you get there, you will save $200
3.You can purchase an appliance (refrigerator, furnaces, A/C, etc.) maintenance contract. You can pay $1,000 today for a year’s maintenance coverage or pay $90 per month, each month, starting today, for 12 months.
If your investments earn 5.00% APR (compounded monthly), how much would you save or would it cost you (in present value terms) to pay on a monthly basis?
You would lose $81.04
You would save $51.31
You would lose $51.31
You would save $81.04
You would lose $55.69
You would save $55.69
4.You can lease a car for 5 years by paying $5,000 today and then making lease payments of $350 per month (starting next month) for 5 years.
Or you can buy the car now for $30,000 and then in 5 years sell the car for $18,000
Either way you have use of the car for 5 years. If your investments earn 5.00% APR (compounded monthly) which alternative is cheaper and by how much in present value terms?
Buying is cheaper in PV terms by $7,209
Leasing is cheaper in PV terms by $2,572
Leasing is cheaper in PV terms by $7,209
Buying is cheaper in PV terms by $7,572
Leasing is cheaper in PV terms by $7,572
Buying is cheaper in PV terms by $2,572
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