Question: You are considering installing new windows into your home which are more energy efficient. You estimate that the windows will save you $100 dollars a

You are considering installing new windows into your home which are more energy efficient. You estimate that the windows will save you $100 dollars a month in energy costs over the next 15 years. It will cost $15,000 to replace the windows. You can borrow or save at a monthly rate of .25%.

  1. If you were only considering the heating costs (not the environment or aesthetics), should you replace the windows?
  2. Now imagine you are able to borrow and save at a monthly rate of .1%. Should you replace the windows?
  3. Explain why the decision to buy the windows changes when the interest rate is lower.

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