Assume the annualized interest rate is 12% compounded monthly and that rent is paid at the beginning of each month. A young couple has made a nonrefundable deposit of the first months rent (equal to $1,000) on a 6-month apartment lease. The next day they find a different apartment that they like just as well, but its monthly rent is only $900.

a. They plan to be in the apartment only 6 months. Should they switch to the new apartment?

b. What if they plan to stay 1 year?