Assume you have Sirius XM in your car and pay Sirius each month END.You are offered the

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Assume you have Sirius XM in your car and pay Sirius each month END.You are offered the following deal:

1) A two year contract (24 months) with payments fixed at $12/month (i.e. no increase in rate for two years), OR

2) Prepay two years worth of service equivalent to $12/month in exchange for a 10%discount equal to $28.80 ($12 x 24 = $288 x 10%).Thus you would pay $259.20 today ($288 x 90%) and save $12/month for two years.

Assume you have sufficient cash in the bank earning 10 basis points per year and have no concerns over the quality of service or Sirius financial future.

What is the implicit interest rate in this deal and should you prepay?

Posted Date: Jun 05, 2024 02:11 PM

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Assume you have Sirius XM in your car and pay Sirius each month END.You are offered the

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