An appliance store sells a TV for $1,200 and gives their customers a full three years to pay for the TV. If interest rates are 5 percent, what is the equivalent sales price of the TV when the customer takes the full 3 years to pay for it?
A) $991.72
B) $1,036.61
C) $1,104.14
D) $1,389.15

Question

Quizplus · Accepted Answer

The equivalent sales price is the present value of the $1,200 payment due in 3 years, discounted at 5% per annum. Using the formula for present value: PV = FV / (1 + r)^n, where FV = $1,200, r = 0.05, and n = 3, the calculation is $1,200 / (1.05)^3 = $1,036.61.

An Appliance Store Sells a TV for $1,200 and Gives