Patrick has a $1,000 overdue debt for accounting books and supplies at Augustana's

Bookstore. Patrick has only $200 in his checking account and doesn't want his parents to

know about this debt. The Bookstore Manager tells Patrick that he may settle the account

in one of two ways since he can't pay it all now:

1.

Pay $200 now and $1200 after he completes his second year of work in public

accounting, two years from today.

2.

Pay $1,400 three years from today.

Assuming that the cost of borrowing money (interest) is the only factor in Patrick's decision

and that the cost of borrowing money to him is 6%, which alternative should he choose?

Your answer must be supported with calculations. (5 points).