If the interest rate is 3.4% per annum, calculate the present value of (A) less the present value of (B), which represents the difference in cost between the two options. Give your answer to two decimal places.

If the interest rate is 3.4% per annum, calculate the present value of (A) less the present value of (B), which represents the difference in cost between the two options. Give your answer to two decimal places.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 34P

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Question

You want to buy a mobile phone today. You can either
(A) pay 9.60 a month for 3 years, with the first payment due today, or
(B) pay a single upfront cost of 249 today.
If the interest rate is 3.4% per annum, calculate the present value of (A)
less the present value of (B), which represents the difference in cost
between the two options. Give your answer to two decimal places.

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