An annual health insurance premium is $2,900. I can pay the lump sum today. Alternatively, the company offers a 2.5% discount (because they save human processing fees) if I pay using direct debit monthly instalments with the first payment due one month from now. I have the money sitting in my bank account today earning an APR of 5% p.a. With monthly compounding, How much better off am I, in PV terms, by choosing to pay $2,900*0.975/12 = $235.63 by direct debit monthly over the next year, rather than paying the lump sum today? Round to the nearest penny.

Answer rating: 100% (QA)

If I choose to pay the lump sum today I will have a cash outflow of 2900 If I choose to pay using di... View the full answer