$($Sunk costs$)$ A young couple has made a nonrefundable deposit of the

first month's rent $($equal to $$2,000)$ on a apartment lease up to $2$ years. Thic samic day

later they find a different apartment that they like just as well, but its monthly rent

is only $$1900.$ They plan to be in the apartment only $12$ months. Should they switch

to the new apartment? What if they plan to stay $2$ years?

Assume a nominal rate interest, rate of $\%8$ convertible monthly. The rent will be paid

monthly and at the beginning of each month.

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$($Hint: Write down the cash flows and compare their present value.$)$