Anil has two offers to buy his is motorcycle. The first offer is a cash price of $15,000. The second offer is a down payment of $5000, and quarterly payments of $725 for four years. If his money can earn 5.5% compounded quarterly, which option should Anil choose? What is the economic advantage?
Kristina
Kristina is deciding whether to deposit $1000 per year for 10 years into an RRSP, or to wait five years, and then deposit $2000 per year. If interest is 4.25% compounded yearly, which option should Kristina choose? What is the economic advantage of her choice?
You can purchase a residential building lot for $60,000 cash or for $10,000 down and month-end payments of $1000 for five years. If money is worth 7.5% compounded monthly, which option should you choose?
Lottery
A lottery offers the winner the choice between a $150,000 cash prize or month-end payments of $1000 for 12½ years, increasing to $1500 per month for the next 12½ years. Which alternative would you choose if money can earn 8.25% compounded monthly over the 25-year period?
You have received two offers on the used car you wish to sell. Mr. Lindberg is offering $9500 cash, and Mrs. Martel’s offer is five semiannual payments of $2000 including one on the purchase date. Which offer has the greater economic value using a discount rate of 6% compounded semiannually? What is the economic advantage in current dollars of the preferred alternative?
Purchase a residential building
You can purchase a residential building lot for $90,000 cash or for $20,000 down and quarterly payments of $5000 for four years. The first payment would be due three months after the purchase date. If the money you would use for a cash purchase can earn 8% compounded quarterly during the next four years, which option should you choose? What is the economic advantage in current dollars of the preferred alternative?
Use APA formation to answer the following questions. Please note if you don’t use APA formation in the essay, your mark will be low even your answer is correct.
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