Videos: Payment Plans and Making Choices

1. For your first job after graduation you have decided to accept a contract position. The manager has offered to pay you $30,000 at the end of the first year and $35,000 at the end of the second year or to pay you $22,000 now, $20,000 at the end of the first year and $20,000 at the end of the second year. Which option is better and by how much, if interest is 10% simple? Use today as your focal date.

2. You have two debts coming due. A debt of $1000 in 6 months and another of $1500 at the end of the year. Interest is charged at 12% simple. You speak to Mr. Hammerhead, the loans manager, and discuss several different payment options.
How much would it cost to payoff both the debts today? (focal date = today)
You would like to defer your repayment and repay the whole debt in 18 months. How much would you have to pay? (focal date = 18 months)

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.