Videos: Payment Plans and Making Choices, Compound

3. Sagheer received two offers for a property that he is selling. Offer 1 consists of $700,000 immediately and offer 2 consists of $500,000 now and $110,000 per year at the end of the next 2 years. If money earns 6% compounded semi-annually, which offer has a better economic advantage and by how much, in today’s dollars?

4. Anna borrowed $1,000 from a local loan shark on January 1, 2010, at j12=24%. On January 1 2012, Anna paid the loan shark $500, and the loan shark agreed to lower the rate to j12=18%.

(a) How much money will Anna owe as of January 1, 2014?

(b) If Anna pays the balance, how much interest will she have paid?

Chapter Attribution

Video chapter in Business Mathematics by Chris Kellman, Leslie Major, Don Mallory, Frank Gruen, and Amy Goldlist shared under a CC BY-NC license.