Question

The local electronics store is offering a promotion​ "1-year: same as​ cash," meaning that you can...

The local electronics store is offering a promotion​ "1-year: same as​ cash," meaning that you can buy a TV​ now, and wait a year to pay​ (with no​ interest). So, if you take home a $1,100 TV​ today, you will owe them $1,100 in one year. If your bank is offering 4% ​interest, what is the true cost of the TV to you​ today?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Let me know if you need any clarification .

Cost of TV today = Present value of future cash outflow
Present value = Future value/(1+r)^t
Future value= $          1,100.00
r=rate of interest = 4%
n = number of year = 1
Present value = 1100/(1+4%)^1
$          1,057.69
Therefore true cost of TV = $   1,057.69
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Imagine visiting overseas, where you win the local lottery and can buy any foreign car you...
Imagine visiting overseas, where you win the local lottery and can buy any foreign car you wish and will pay full retail price using the local currency, payable in three months. You have determined that you have enough cash at your bank in New York City, which pays 0.35 percent interest per month, compounding monthly, to pay for the car. There are two ways to pay for your car: Keep the funds at your bank in the United States and...
Your firm sells for cash only, but it is thinking of offering credit, allowing customers 90...
Your firm sells for cash only, but it is thinking of offering credit, allowing customers 90 days to pay. Customers understand the time value of money, so they would all wait and pay on the 90th day. To carry these receivables, you would have to borrow funds from your bank at a nominal 10%, daily compounding based on a 360-day year. You want to increase your base prices by exactly enough to offset your bank interest cost. To the closest...
Suppose you deposit $20,000 into a saving account at your local bank. If the bank pays...
Suppose you deposit $20,000 into a saving account at your local bank. If the bank pays an average interest rate of 5% annually, how much money will you have in your saving account in 15 years? Suppose, your bank talks you into opening a saving account with them. The bank promises that if you put $10,000 in the saving account today, you will receive $20,000 10 years from now. What is the average interest rate that the bank will pay...
You see a commercial for G.J. Worthwent and they are offering to give you cash now...
You see a commercial for G.J. Worthwent and they are offering to give you cash now for your structured settlement. You remember that you do have an annuity that is paying you $500 a month ($6,000 per year) that you had been using for your child’s education expenses. Now that your young one has graduated, you really do not need the monthly check anymore but would like to buy them a graduation present and need cash now so you call...
Your brother has offered to give you $185 starting next year, and after that growing at...
Your brother has offered to give you $185 starting next year, and after that growing at 2.7% per year for the next 20 years. You would like to calculate the value of this offer by calculating how much money you would need to deposit in a local bank so that the amount will generate the same cash flows as he is offering you. Your local bank will guarantee a 6.2% annual interest rate so long as you have money in...
If you borrow $1,000 today to be paid back one year from today at 5% interest,...
If you borrow $1,000 today to be paid back one year from today at 5% interest, the payment you will have to make in one year will be a. ?$1,050. b. ?$1,500. c. $1,055. d. ?$1,005. If the interest rate is 5%, the value of $1,000 at the end of 10 years is   a. ?$1,505. b. ?$1,628.89. c. ?$10,000. d. ?$57,665.04. On payday you get paid in cash, so each week you put $10 into a shoebox in your closet...
Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one...
Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or take out a loan. They owe the supplier $11,500 with terms of 2.4/10 Net 40, so the supplier will give them a 2.4 % discount if they pay by today (when the discount period expires). Alternatively, they can pay the full $11,500 in one month when the invoice is due. H2M is considering three options: Alternative A: Forgo the discount...
What is the present value (PV) of $500 paid in 1 year if the current interest...
What is the present value (PV) of $500 paid in 1 year if the current interest rate on assets with a similar level of risk is $7%? (i.e. you want to earn 7% interest) Question options: $500 $535 $467.29 We don't have enough information to tell. Your aunt tells you that she will give you $100 today. However, if you are willing to wait, she will give you $105 in one year. You are convinced your aunt will follow through,...
Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one...
Hand-to-Mouth (H2M) is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or take out a loan. They owe the supplier $12,000 with terms of 2.2/10 Net 40, so the supplier will give them a 2.2% discount if they pay by today (when the discount period expires). Alternatively, they can pay the full $12,000 in one month when the invoice is due. H2M is considering three options: Alternative A: Forgo the discount on...
Your startup is currently cash-constrained, and you must make a decision about whether to delay paying...
Your startup is currently cash-constrained, and you must make a decision about whether to delay paying one of its suppliers, or take out a loan. You owe the supplier $7000 with terms of 3/10 Net 40, so the supplier will give you a 3% discount if you pay today (when the discount period expires). Alternatively, you can pay the full $7000 in one month when the invoice is due. You are considering three options: Alternative A: Forgo the discount on...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT