Question
The ad screams: BUY NOW AND PAY NOTHING UNTIL NEXT YEAR! NO INTEREST! Such promotional campaigns have appeared with increasing frequency in recent years often
The ad screams: BUY NOW AND PAY NOTHING UNTIL NEXT YEAR! NO INTEREST! Such promotional campaigns have appeared with increasing frequency in recent years often offered by companies such as Best Buy and Baileys Furniture. They may offer 6 months or more of interest-free loans. For purchases made in November or December, they may offer 14 months with no payments or interest, thus permitting purchasers to defer any cash outlays until early next year. However, if full payment is not made by the specified date, interest is typically due from the original date of purchase, often at 18 to 24 percent.
Assume you are a customer about to purchase $2,500 of furniture and can choose between purchasing it at either of two stores having special sales: Zippy Furniture Sales: 14 months with no payments or interest. If the full amount is not paid by the end of that time, interest must be paid from the date of purchase at 24% annual rate. Zappy Home Interiors: All merchandise in sale for 20% off, cash must be paid at the time of purchase.
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