12. Buy on time or pay cash?

You are going to make a substantial purchase. You have enough money to pay cash, but dont know if thats the way to make best use of your assets. Maybe you should take out an installment loan to make the purchase and invest the cash you would otherwise have used to pay for it.

Use the information provided to complete the following worksheet and analyze how the numbers work out most favorably for you. For simplicity, compounding is ignored in calculating both the cost of interest and interest earnings. (Note: Enter your dollar answers rounded to the nearest two cents and precede numbers that are less than zero (0) with a minus sign ().)

The interest on a loan will cost you more than the interest you would earn if you invested the principal. If you invest the principal, you'll earn more interest than you'1l pay on the loan