Question

Reginald is about to lease an apartment for 30 months. The landlord wants him to make the lease payments at the start of the month. The monthly payments are ​$1,600 per month. The landlord says he will allow Reg to prepay the rent for the entire lease with a discount. The​ one-time payment due at the beginning of the lease is ​$42,864. What is the implied monthly discount rate for the​ rent? If Reg is earning 0.6​% on his savings​ monthly, should he pay by month or make the​ one-time payment?

What is the implied monthly discount rate for the​ rent? ____​%

Answer 1

Hence, implied monthly discount rate for the​ rent is 0.80%

He should pay in one-time payment as it earns at 0.80% which is higher than his current earnings rate (6%).