Question

A store sells a television for $1000. Customers can choose to receive a 10% discount and pay it off with a loan at a simple interest rate of 4% or they can choose to pay the full price and pay it off in 3 years no interest. If the customer plans to pay it off in 3 years, which option is better

Answer 1

Second option

Explanation:

Option 1:

1. Original cost: 90% * 1000 = $900

2. Interest: A = P(1 + rt), A = amount, P = original amount, r = rate, t = years

Plug in: A = 900(1 + 0.05*3)

Multiply + add: A = 900(1.15)

Multiply: A = $1035

Option 2: $1000

So, paying full price upfront will save more money if all goes to plan.