Question

Kareem is purchasing a new television that costs $2250. He has two different options to finance the purchase and he wants to pay off the debt in a year by making regular monthly payments.

Option A: Finance the purchase through the store at an interest rate of 12.1%, compounded daily, with a $125. rebate.
Option B: Finance the purchase with a line of credit at an interest rate of 10.2%, compounded daily. What is the total cost of each option? List the total cost of the cheaper option here:

Answer 1

The total cost of financing the television through Option A is $2381.49, which is cheaper than the total cost of financing through Option B ($2383.75).

Step-by-step explanation:

To compare the total cost of each financing option, we need to calculate the total amount paid in each case. Option A: The cost of the television is $2250 - $125 rebate = $2125.

Using the compound interest formula:

`Total cost = Principal x (1 + (Rate/365))^(^3^6^5^ x^ T^i^m^e^)`

=
`$2125 x (1 + (0.121/365))^(^3^6^5^ x ^1^)`

= $2381.49

Option B: Using the same formula:

`Total cost = Principal x (1 + (Rate/365))^(^3^6^5^ x ^T^i^m^e^)`

=
`$2250 x (1 + (0.102/365))^(^3^6^5^ x^ 1^)`

= $2383.75

The total cost of financing the television through Option A is $2381.49, which is cheaper than the total cost of financing through Option B ($2383.75).