Antonio would like to replace his golf clubs with a custom-measured set. A local sporting goods megastore is advertising custom clubs for

$510

,

including a new bag. In-store financing is available at

3.18

percent, or he can choose not to renew his

$300

certificate of deposit (CD), which just matured. The advertised CD renewal rate is

4.16

percent. Antonio knows the in-store financing costs would not affect his taxes, but he knows he'll pay taxes (25 percent federal and 5.75 percent state) on the CD interest earnings. Should he cash the CD or use the in-store financing? Why?

The after-tax CD earnings rate is

nothing

%.

(Round to two decimal places.)

Should he cash the CD or use the in-store financing?(Select the best choice below.)

A.

Antonio should cash in his CD to purchase the golf clubs because his after-tax CD earnings rate of

2.88

percent is less than the in-store financing rate of

3.18

percent.

B.

Antonio should use the in-store financing to purchase the golf clubs because

3.18

percent is greater than his after-tax CD earnings rate of

2.88

percent.

C.

Antonio should use the in-store financing to purchase the golf clubs because

3.18

percent is the same as his CD earnings rate of

4.16

percent.

Click to select your answer(s).