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21 December, 10:42

Rosalyn is a single mother with two children ages 3 and 5, and she lives paycheck to paycheck. She is trying to save money for a Christmas present for each of her children. She does not have a checking account or a credit card. She wants to get each child a bicycle with a character from their favorite TV show, but the bikes are $100 each. She only has $50 and is afraid that by the time she saves another $150 those bikes will have sold.

What payment option would you recommend to Rosalyn?

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  1. 21 December, 11:43
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    This question is business question so I will answer it from business perspective. The least that I can do is offer her a one year package with an advance of $50. The monthly installment along with the interest that she will pay would be:

    Monthly Installment including interest = (Amount Due/12months) + (Outstanding Amount * Interest Rate) ... Eq1

    So I assume the interest rate is 5% and as we know the outstanding amount is $150.

    By putting the values, we have:

    Monthly Installment including interest = ($150/12months) + ($150 * 5%)

    = $12.5 + $7.5 = $21 per month

    Now the outstanding amount for the second month = $150 - $12.5 = $137.5

    Now we will use this new outstanding amount to calculate the monthly installments including the interest by putting the values in the equation 1. Similarly for the next coming months the installments would be calculated.
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