Your company wants to sell luxury/premium handbags in their stores. A large portion of the market...

  

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Your company wants to sell luxury/premium handbags in their stores. A large portion of the market cannot afford such an expensive product in one single payment. As the CFO, you have decided to collaborate with the marketing department to offer different deals to pay for the product over time. The options are described below. The cost of the handbag is 1 700 AED. OPTION A: Pay for the product immediately for 1 700 AED. OPTION B: Pay for the product over 6 months at a rate of 5.2% monthly compounded continuously. OPTION C: Pay the store 500 AED immediately and then pay the rest over 6 months at a rate of 7.2% monthly compounded continuously. 1. Calculate how much the customer will pay in total for OPTION B and OPTION C. (level 3-4) 2. Which option would be the best for the company? Explain the difference in the pricing options from the company's point of view. 3. On the next page, the graphs of OPTION A and OPTION B are shown. Draw on the grid below OPTION C. Plot the coordinate on your graph for 6 months. 4. The company has decided to offer an OPTION D to the customers. This customer cannot afford any of the above options and has to pay the bag off over a few extra months. Unfortunately, the bag will cost more in the long run but the rate will be less. The bag will cost 2500 AED in total at a rate of 4.8% compounded continuously monthly. How many months will it take for her to pay off the bag? Check that she paid the full amount. Your company wants to sell luxury/premium handbags in their stores. A large portion of the market cannot afford such an expensive product in one single payment. As the CFO, you have decided to collaborate with the marketing department to offer different deals to pay for the product over time. The options are described below. The cost of the handbag is 1 700 AED. OPTION A: Pay for the product immediately for 1 700 AED. OPTION B: Pay for the product over 6 months at a rate of 5.2% monthly compounded continuously. OPTION C: Pay the store 500 AED immediately and then pay the rest over 6 months at a rate of 7.2% monthly compounded continuously. 1. Calculate how much the customer will pay in total for OPTION B and OPTION C. (level 3-4) 2. Which option would be the best for the company? Explain the difference in the pricing options from the company's point of view. 3. On the next page, the graphs of OPTION A and OPTION B are shown. Draw on the grid below OPTION C. Plot the coordinate on your graph for 6 months. 4. The company has decided to offer an OPTION D to the customers. This customer cannot afford any of the above options and has to pay the bag off over a few extra months. Unfortunately, the bag will cost more in the long run but the rate will be less. The bag will cost 2500 AED in total at a rate of 4.8% compounded continuously monthly. How many months will it take for her to pay off the bag? Check that she paid the full amount.

Answer rating: 100% (QA)

O Principal 1700 Rate 52 monthly Time Amount Amount Option C principal ... View the full answer