You can purchase a residential building lot for $90,000 cash or for $20,000 down and quarterly payments of $5,000 for four years. The first payment would be due three months after the purchase date. If the money you would use for a cash purchase can earn 8% compounded quarterly during the next four years, which option should you choose? What is the economic advantage in current dollars of the preferred alternative?

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The Answer of You can purchase a residential building lot for $90,000 cash or for $20,000 down and quarterly payments of $5,000 for four years. The first payment would be due three months after the purchase date. If the money you would use for a cash purchase can earn 8% compounded quarterly during the next four years, which option should you choose? What is the economic advantage in current dollars of the preferred alternative?

You Can Purchase a Residential Building Lot for $90,000 Cash