Fight Finance

Courses  Tags  Random  All  Recent  Scores

Scores
keithphw$5,521.61
Visitor$3,006.43
skanibaglu$2,328.63
DanielDng$2,300.70
boodge$1,798.63
oosterhoff$1,647.00
emmarose...$1,567.43
Fauzan A...$1,390.00
Visitor$1,322.80
mainguye...$1,269.43
Visitor$1,008.63
xinerator$950.00
xinerator$930.00
Visitor$930.00
Fronk$789.43
Visitor$780.00
Visitor$760.00
Visitor$610.00
Visitor$590.00
LuluLutt...$569.43
 

Question 192  NPV, APR

Harvey Norman the large retailer often runs sales advertising 2 years interest free when you purchase its products. This offer can be seen as a free personal loan from Harvey Norman to its customers.

Assume that banks charge an interest rate on personal loans of 12% pa given as an APR compounding per month. This is the interest rate that Harvey Norman deserves on the 2 year loan it extends to its customers. Therefore Harvey Norman must implicitly include the cost of this loan in the advertised sale price of its goods.

If you were a customer buying from Harvey Norman, and you were paying immediately, not in 2 years, what is the minimum percentage discount to the advertised sale price that you would insist on? (Hint: if it makes it easier, assume that you’re buying a product with an advertised price of $100).




Copyright © 2014 Keith Woodward