What if your decision making process wasn’t quite so clear-headed and rational? What if the cashier at Best Buy convinced you to sign up for a Best Buy credit card at the check-out counter? As an incentive for signing up for the card and using it to purchase the TV, you got a free three-year service plan on your TV, basically guaranteeing that investment that you were going to make regardless. The interest rate on the card after one year is 16%.

1. Now how much cash do you have to either put in a savings account (as your parents insist) or invest in Chris’s company?

2. What will the return be after one year if you put that money in a savings account?

3. Investing all of it in Chris’ company seems like your best option, so that’s what you decide to do. What will the return be if you invest all of that money in Chris’ company?

4. How much will you now have to pay in interest after one year on the TV?

5. Did you make the right decision? How much did you earn by taking the offer to finance the TV on the credit card, OR, how much did that impulsive decision cost you?

Answer rating: 100% (QA)

Finance Homework Scenario 2 Decision making processes in terms of finances is often difficult when weighing promises made the amount of money at hand ... View the full answer