An infomercial is selling a thigh toner for either $99 or three monthly payments of $39 (in which the first payment occurs immediately and remaining payments occur at the end of the next two months).
a. Calculate the net present value of the three-month installment plan at a discount rate of 1% per month. Which payment option makes the consumer better off?
b. Calculate the net present value of the three-month installment plan, using hyperbolic discounting. Assume that the monthly discount rate of 1% is discounted an additional 40%. Which payment option makes the consumer better off?

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The Answer of An infomercial is selling a thigh toner for either $99 or three monthly payments of $39 (in which the first payment occurs immediately and remaining payments occur at the end of the next two months).
a. Calculate the net present value of the three-month installment plan at a discount rate of 1% per month. Which payment option makes the consumer better off?
b. Calculate the net present value of the three-month installment plan, using hyperbolic discounting. Assume that the monthly discount rate of 1% is discounted an additional 40%. Which payment option makes the consumer better off?

An Infomercial Is Selling a Thigh Toner for Either $99