An appliance is for sale at either (a) P15,999 cash or (b) on terms, P1,499 each month for the next 12 months. Money is 9% comp

Question

3 years ago

7

ounded monthly. Which is lower, the cash price or the present value of the installment terms? Explain.

1 answer:

frutty [35] · Answer 1 · 2022-05-24T17:02:06+03:00

Answer:

Cash price

Step-by-step explanation:

The computation is shown below:

The Interest rate per month (r) = (9% ÷ 12) = 0.75%

Now Present value of the monthly payment is

= PMT × {[(1 + rate of interest)^number of years - 1] ÷ rate of interest}

= 1,499 × {[(1 + 0.75%)^12 - 1] ÷ 0.75%}

= 18,748.89

And the cash price is 15,999

So, the cash price would be lower