Option Rex and Bonnie are wanting to buy a new entertainment couch with a sales price of $20,000 for their home theater room. They are presented with 2 different financing options from their bank for their purchase. Analyze and compute the required info below. Option 1: A single-payment loan due in 2 years. Interest is computed using the simple interest method (I=P*R* T). The annual interest rate is 12%. Option 2: A discounted loan due in 2 years. The discount/interest is computed using the discount method (D=P* R * T). The annual discount/interest rate is 12%. (Hint: The loan balance to be repaid is = to the sales price of the couch)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Option
Rex and Bonnie are wanting to buy a new
entertainment couch with a sales price of $20,000 for
their home theater room. They are presented with 2
different financing options from their bank for their
purchase. Analyze and compute the required info
below.
Option 1: A single-payment loan due in 2 years.
Interest is computed using the simple interest method
(I=P*R* T). The annual interest rate is 12%.
Option 2: A discounted loan due in 2 years. The
discount/interest is computed using the discount
method (D=P* R * T). The annual
discount/interest rate is 12%.
(Hint: The loan balance to be repaid is = to the sales
price of the couch)
Transcribed Image Text:Option Rex and Bonnie are wanting to buy a new entertainment couch with a sales price of $20,000 for their home theater room. They are presented with 2 different financing options from their bank for their purchase. Analyze and compute the required info below. Option 1: A single-payment loan due in 2 years. Interest is computed using the simple interest method (I=P*R* T). The annual interest rate is 12%. Option 2: A discounted loan due in 2 years. The discount/interest is computed using the discount method (D=P* R * T). The annual discount/interest rate is 12%. (Hint: The loan balance to be repaid is = to the sales price of the couch)
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