Question

Pierce Publishing sells encyclopedias under two payment plans: cash or installment. Under the installment plan, the customer pays $23/month over 2 yr with interest charged on the balance at a rate of 15%/year compounded monthly. Find the cash price for a set of encyclopedias if it is equivalent to the price paid by a customer using the installment plan. Please round the answer to the nearest cent.
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a. $332.81
b. $420.19
c. $564.26
d. $474.36
e. $406.93

Please explain. Thank you

Answer 1

i = .15/12 = .0125
n = 24
payment = 23

PV = 23( 1 - 1.0125^-24)/.0125
= 474.36