+18 Carson is planning to buy and install new tires and rims on his car. The cost is $1150,
which he will use credit to pay. He wants to pay off the loan in 6 months and has two
credit options
• The tire shop has financing at 16.8%, compounded monthly, and is offering a $100
immediate rebate
• Carson’s existing credit card has a zero balance and a rate of 14.6% compounded daily.
a) What are the monthly payments? Which option requires lower payments?
b) What is the interest for each option? Which option will charge less interest?
c) What is the total cost for each option? Which option will cost him less overall?
a) Finance option: The monthly payments will be==$183.67
Credit card option: The monthly payments will be: $199.96
b) Finance option: [183.67 x 6 months - 1,150 - 100 credit]==$52.02 - interest charge.
Credit card option: [199.96 x 6 months - 1,150 ]==$49.76 - interest charge.
c) Finance option will cost him: 183.67 x 6 ==$1,102.02 - total cost
Credit card option will cost him: 199.96 x 6 ==$1,199.76 - total cost
Conclusion: Finance option is a better deal because he gets $100 credit up front.
