Alain can purchase an airline ticket for $500 now or can pay $525 in 3 months. If interest is 2.5%, determine whether Alain should purchase the ticket now or in 3 months.
A) Buy now - Savings of $33.88
B) Buy now - Savings of $21.74
C) No difference between two options
D) Buy later - savings of $33.88
E) Buy later - savings of $21.74

Question

Quizplus · Accepted Answer

The future value of $500 in 3 months at 2.5% annual interest is approximately $513.26. Since $525 is more than $513.26, Alain saves $11.74 by buying now.

Alain Can Purchase an Airline Ticket for $500 Now or Can