1. Which is a better deal? You must support your view with calculation.

To purchase an iPhone 5s with 16GB memory in 2014 without locking-in any phone

plan you have two options:

1) Buy at Wal-Mart on the spot with a discounted price of $549.

2) Buy at T-Mobile with a 2-year 0% APR finance, where the monthly payment is $26. In this case, the ticketed price would show $624=$2624. (By now, you should know this is a sham.)

(a) Suppose that you do have money to pay for a phone and the interest rate on your saving account is 0.2%. Where should you purchase your phone? Why?

(b) Suppose that you don't have money to pay for a phone right now. You could put it on your credit card. The card has 12% APR. Where should you purchase your phone? Why?