QUESTION 1 When shopping for a new iPhone X today, you are considering buying it outright or on a 24 month plan (without data and sim plan).

Buying it outright costs $999 while on a 24 month plan, the repayments are $43/month. The opportunity cost of capital can be used as a discount rate and by purchasing the phone, you give up investing in shares which earn you 6% p.a.

Which is cheaper, buying the phone outright or the installment plan? Choose...24 month plan or Buying outright

How much do you save by choosing the cheaper option?

QUESTION 2

A $888 bill for council rates has just arrived. Reading through the payment options, you can choose to pay it upfront, or over two types of installment plans.

Plan A: $222 paid quarterly in arrears for 4 quarters

Plan B: $74 paid monthly in advance for 12 months

A discount rate of 16% p.a. applies.

Which is the cheapest option? Choose...Plan APlan BPay upfront

Which is the most expensive option? Choose...Pay UpfrontPlan APlan B

How much more would you pay if you picked the most expensive option compared to the cheapest option?