Question

You have the alternative of paying for university fees today for a payment of $16,000 or,...

You have the alternative of paying for university fees today for a payment of $16,000 or, you can select a payment plan where you pay $7,000 in 11 months from today and another $10,000 in exactly 24 months from today. If the interest rate is 10.1%p.a. compounding monthly, what is the advantage that the payment plan has over the upfront payment?

(expressed in present day value rounded to the nearest cent; do not show $ sign or comma separators; if the payment plan is more costly than $16,000 today, your answer will show a negative eg. -300.35)

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Answer #1

The answer is $1438.66

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