Julie Choi and Michael Wang are getting married. They do not have money to buy furniture...
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Julie Choi and Michael Wang are getting married. They do not have money to buy furniture for their condo at Lawrence and Yonge. NoGoodBoy Furniture offers the following choices: 1. Pay $6000 cash now for $7000 retail value of the furniture. No credit cards allowed. 2. Pay no money down except for $50 for credit check and no payments for one year. After that pay $7000 over two years in monthly installments of $350. Since Julie and Michael have no cash, they have to borrow $6000 for the first choice. Since they have no credit history, they have no choice but to borrow from Joe the Moneyman. Joe will lend them $6000 for 3 years at an annual interest rate of 12% compounded monthly. Only interest will be payable monthly, principal of S6000 will be paid at the end of 3 years. Which one is the better choice? Julie Choi and Michael Wang are getting married. They do not have money to buy furniture for their condo at Lawrence and Yonge. NoGoodBoy Furniture offers the following choices: 1. Pay $6000 cash now for $7000 retail value of the furniture. No credit cards allowed. 2. Pay no money down except for $50 for credit check and no payments for one year. After that pay $7000 over two years in monthly installments of $350. Since Julie and Michael have no cash, they have to borrow $6000 for the first choice. Since they have no credit history, they have no choice but to borrow from Joe the Moneyman. Joe will lend them $6000 for 3 years at an annual interest rate of 12% compounded monthly. Only interest will be payable monthly, principal of S6000 will be paid at the end of 3 years. Which one is the better choice?
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