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An auto dealership, KM Motors, is offering its customers free credit on a $10,000 car. The customer pays $4000 down and then the balance at the end of 2 years. A competing dealership, T Motors, does not offer free credit but will provide $500 off of the list price. If the interest rate is 10 percent, which company is offering the better deal?

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This solution is comprised of a simple explanation of how to calculate the present value of an investment

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Note that the customer pays more in sum through KM Motors, but since a portion of the payment is delayed, the customer can keep the ...

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