Question
A young couple has made a deposit of the first month's rent (equal to $1,000) on a 6-month apartment lease. The deposit is refundable at
A young couple has made a deposit of the first month's rent (equal to
$1,000) on a 6-month apartment lease. The deposit is refundable at
the end of six months if they stay until the end of the lease.
The next day they find a different apartment that they like just as well,
but its monthly rent is only $900. And they would again have to put a
deposit of $900 refundable at the end of 6 months.
They plan to be in the
apartment only 6 months. Should they switch to the new apartment? Assume
an (admittedly unrealistic!) interest rate of 12% per month compounded monthly
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