A furniture company is offering a choice of deals. You can receive $500 cash back on the purchase, or a 3 percent APR, 2-year loan. The price of the dining room set is $5,000 and you could obtain a 2-year loan from your credit union at 4 percent APR. What is the cost per month of each deal?

Question

Quizplus · Accepted Answer

To calculate the cost per month for the cashback option, we need to subtract the $500 from the price of the dining room set, which gives us $4,500. Then, we can divide this by 24 months to get a cost per month of $187.50. 
For the 3 percent APR, 2-year loan option, we can use a loan calculator to determine the monthly payment, which comes out to $217.12. 
Comparing the two options, the cashback option has a lower cost per month ($187.50 vs. $217.12). Therefore, the best choice is to take the cashback option.

A Furniture Company Is Offering a Choice of Deals