Question

An electronics store offers you no interest financing for one year on a $1000 flat-screen television. A nearby electronics store offers the same television on sale at $985. You have set aside $1000 for this purchase in your bank account that earns 3% interest annually. Which offer is a better deal?

Answer 1

The second option is the better deal.

Step-by-step explanation:

Considering the 3% rate

we can: purchase the 1,000 dollars TV and earn the interest on the account.

This will make an amount of

`Principal \: (1+ r)^(time) = Amount`

Principal 985.00

time 1.00

rate 0.03000

`985 \: (1+ 0.03)^(1) = Amount`

Amount 1,014.55

Thus, we end up with 14.55 dollars and a TV

In the other case, we purchase the 985 dollars now and capitalize the 15 dollars:

`Principal \: (1+ r)^(time) = Amount`

Principal 15.00

time 1.00

rate 0.03000

`15 \: (1+ 0.03)^(1) = Amount`

Amount 15.45

We end up with 15.45 dollars

As this option yields a better result we should use this option.