Sam urgently needs $30000. He goes to a local finance company who agrees to lend this amount
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Question:
Sam urgently needs $30000. He goes to a local finance company who agrees to lend this amount and proposes two payment options.
A) Pay $36,000 at the end of the year.
B) Pay $3,000 every month for a total of $36,000 payment over the year.
The going interest rate is 7% with monthly compounding. If Sam chooses option (B) is he making a mistake?
calculate the future value of option (B) at the end of the year. This is the total amount that the bank will have at the end of the year, assuming that they reinvest Sam's payments at the going interest rate.
Your final answer should be future value of option (B) - 36,000.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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