You are planning to buy one of two brands of sofas, which you hope to use over the next twenty years. Brand J costs $975 and lasts for about twenty years. Brand K costs $265 and lasts for about five years, so you will need to buy four Brand K sofas to equal one Brand J sofa. In either case, you plan to pay for your sofa using your credit card, which has an interest rate of 14.55%, compounded monthly. You can pay off a Brand J sofa with eight years of monthly payments, and you can pay off a Brand K sofa with three years of monthly payments. Assuming that you make no other purchases on your credit card, over twenty years, which brand will be cheaper, and how much cheaper will it be? (Round all dollar values to the nearest cent.)
How can credit cards be safer than cash?
a) It is harder to lose a single credit card than a large number of bills.
b) A credit card requires a signature, so it is impossible for anyone other than you to use.
c) If a merchant does not hold up their end of an agreement, you can call the credit company and dispute the charges.
d) Cash can be miscounted, but credit cards cannot.
