Deciding whether to pay cash or finance a purchase.Use Worksheet 7.2. Matilda Edwards wants to buy a home entertainment center.

Complete with a big-screen TV, DVD, and sound system, the unit would cost $4,500. Matilda has over $15,000 in a money market fund, so she can easily afford to pay cash for the whole thing

(the fund is currently paying 3 percent interest, and Matilda expects that yield to hold for the foreseeable future). To stimulate sales, the dealer is offering to finance the full cost of the unit with a 36-month, simple interest installment loan at 6 percent.

Matilda wants to know whether she should pay cash for the home entertainment center or buy it on time. (Note: While Matilda is in the 22 percent tax bracket she does not itemize deductions on her tax returns.) Briefly explain.