You decide to buy a $1250 entertainment system for your apartment. The salesman asks you to pay 20% down and is willing to finance the remaining $1000 with a 2-year loan having an APR of 5% and a monthly payment of $43.87. (The total of your payments on the loan will be $1052.88.) Suppose that you actually have $1000 in your savings account (after the down payment) and can invest it at 4% compounded monthly. You must decide whether or not to take the loan. The salesman tells you that you will come out ahead if you take the loan, since $1000 invested at 4% interest compounded monthly grows to $1083.14, which is greater than the total payments on the loan. This doesn't make sense to you since you would be borrowing money at 5% and only earning 4% on the money you invest. What is wrong with the salesman's reasoning? (Note: Ignore taxes.)