A very well known furniture retailer frequently advertises no money down and no interest until 2006!...

 

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A very well known furniture retailer frequently advertises "no money down and no interest until 2006!" You want to buy some furniture now, and have a bit of spare cash available. You go to the store on June 30, 2004 and purchase $20,000 of furniture. The credit terms that you agree to are $2,000 down [paid June 30, 2004]; $1,000 per month for the next 18 months [commencing July 31, 2004]; and no interest. Your brother comes over for dinner. He likes your new furniture and wants to buy some just like it. However, he would rather pay all cash when he buys it. If the current interest rate on 18-month loans is 8%, what is the "cash price" ("true price/fair market value) that your brother should pay for the furniture? A very well known furniture retailer frequently advertises "no money down and no interest until 2006!" You want to buy some furniture now, and have a bit of spare cash available. You go to the store on June 30, 2004 and purchase $20,000 of furniture. The credit terms that you agree to are $2,000 down [paid June 30, 2004]; $1,000 per month for the next 18 months [commencing July 31, 2004]; and no interest. Your brother comes over for dinner. He likes your new furniture and wants to buy some just like it. However, he would rather pay all cash when he buys it. If the current interest rate on 18-month loans is 8%, what is the "cash price" ("true price/fair market value) that your brother should pay for the furniture?

Answer rating: 100% (QA)

To determine the cash price or fair market value that your brother should pay for the furniture we n... View the full answer