Hi, i am struggling on understanding the question. I found the indifference rate between these two methods is 1.5% which is 18% per annum. . Do i need to find the present value for both methods while method 2 PV= cash $5,300?And method 1 what interest rate should i use to work out the present value for method 1? and should i use present value for annuity, pmt $300, n= 18 to work out the present value and compare with method 2? Could you please explain to me how can i work out this and decide which method is better.

Question: You've been considering purchasing a (very) large-screen television for your home. During visits to your local electronics retailers you've identified the one that you think is right for you: You are now thinking about a choice of payment methods which are available to you:

Method 1 The advertised price is $6,000 but there is a "Zero Percent Finance" offer that the shop has advertised, requiring you to pay a 10% deposit followed by 18 monthly payments of $300.

Method 2 Although the advertised price of the TV is $6,000, the shop assistant has indicated he might be willing to "do a deal" for only $5,300 if you can pay cash.

Your bank has agreed to let you "top up" your mortgage to purchase this (and a few other toys) and is currently offering an 18 month fixed rate of 4% p.a.

Demonstrate which of the two alternative methods is most advantageous for you to use. In doing so, estimate what you think the real rate of the 0% finance is.