Question

ason is looking for an engagement ring to offer his girlfriend. He has found a similar ring at each of four different jewelry stores. He doesn't have enough money to pay for the ring in cash, so he is planning on opening a line of credit (credit card) at the store he ends up buying the ring from. The chart below outlines the difference in the price of the rings the different stores offer as well as the difference in credit options. Jason plans to pay off the ring purchase in 36 months. According to the information in the table, which of the jewelry stores will have the cheapest ring in the end?


Store
Price ($)
Credit Card APR
Jessie's Jewelry
$1,250.00
19%
Über Pawn
$1,328.00
18.5%
Diamonds Forever
$1,199.00
21%
Drake and Family Gold
$1,219.00
20%

a.
Jessie's Jewelry
b.
Über Pawn
c.
Diamonds Forever
d.
Drake and Family Gold

Answer 1

Use the loan payment formula (monthly rate r = APR/12, n = 36):
monthly payment = P * [r / (1 − (1 + r)^−n)], total paid = monthly payment × 36.

Calculations (rounded):
- Jessie's Jewelry: P = $1,250, r = 0.19/12 → total ≈ $1,650
- Über Pawn: P = $1,328, r = 0.185/12 → total ≈ $1,742
- Diamonds Forever: P = $1,199, r = 0.21/12 → total ≈ $1,626
- Drake and Family Gold: P = $1,219, r = 0.20/12 → total ≈ $1,633

Diamonds Forever gives the lowest total cost. Answer: c.