Judy Thomas has a $2,800 overdue debt for medical books and supplies at Joe's Bookstore. She...

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Judy Thomas has a $2,800 overdue debt for medical books and supplies at Joe's Bookstore. She has only $900 in her checking account and doesn't want her parents to know about this debt. Joe's tells her that she may settle the account in one of two ways since she can't pay it all now: 1. Pay $900 now and $2,300 when she completes her residency, two years from 2. Pay $3,700 one year after completion of residency, three years from today. Assuming that the cost of money is the only factor in Judy's decision and that the cost of money to her is 8%, which alternative should she choose? Your answer must be supported with calculations. Judy Thomas has a $2,800 overdue debt for medical books and supplies at Joe's Bookstore. She has only $900 in her checking account and doesn't want her parents to know about this debt. Joe's tells her that she may settle the account in one of two ways since she can't pay it all now: 1. Pay $900 now and $2,300 when she completes her residency, two years from 2. Pay $3,700 one year after completion of residency, three years from today. Assuming that the cost of money is the only factor in Judy's decision and that the cost of money to her is 8%, which alternative should she choose? Your answer must be supported with calculations.

Answer rating: 100% (QA)

Option 1 Present value7001... View the full answer