You want to purchase a set of furniture from a local vendor.The vendor kindly gives you such
Question:
You want to purchase a set of furniture from a local vendor.The vendor kindly gives you such alternative offers:
The price tag amount of the furniture set is $5,999.
Offer 1:Instant payoff at one time.You geta 10% discountoff the price tage if you instantly pay off the net price on the purchase date.
Offer 2:Credit installment loan over time.The vendor's customized credit loan terms for you are: No price discount will be provided, zero down payment needed today, interest-free during the first 12 months, and then 1.60% interest per month after.
Installment loan payments are $125 per month, by the end of month.
And an extra $5 per month for the account maintenance fee, by the end of month.
Solve and answer the following:
1) How many months in total will it take you to pay off the whole deal, if you accept the vendor's credit installment offer?
2) How costly would it be (in terms of annualized percentage rate APR), if you accept the vendor's credit installment offer instead of the instant payoff option?
3) If the vendor does NOT provide any price discount for instant payoff, how costly would it be (in terms of APR) for accepting the vendor's credit installment offer?