Calculating which is the more economical option, finance question. Sandy Triton
ID: 2647686 • Letter: C
Question
Calculating which is the more economical option, finance question.
Sandy Triton is an avid scuba diver who lives in Boston. Since New England waters are very cold, Sandy has decided to purchase a dry suit for diving. After some investigation, Sandy must decide which one of two suits to buy-a "Norway" suit for $1, 000 or an "Oregon" suit for $400. The major difference between the two is that the Norway should last for 300 dives whereas the Oregon suit will need to be replaced after 100 dives. Sandy has $1, 000 in a savings account earning 9 percent interest Which suit would he most economical for Sandy if she expects to make: 25 cold water dives per year? 50 cold water dives per year? Show your work!Explanation / Answer
Interest rate 9% Noeway Suit Oregon Suit Cost of suit 1,000.00 400.00 No of dives 300.00 100.00 a) 25 dives per year No of years suit will last 12.00 4.00 Interest earned on oregon suit in the first 4 years({1000-400) *1.09*1.09*1.09*1.09} - 600= 846.95 -600 = 246.95 246.95 Total Amount after 4 years(600+247) 847.00 Then after 4 years Oregon suit will be purchased again and it will last for another 4 years Interest earned on oregon suit in the nextt 4 years({1000-800+ 247) *1.09*1.09*1.09*1.09} - 447= 631 -447 = 184 184.00 Total Amount after 8 years(447+184) 631.00 Then after 8 years Oregon suit will be purchased again and it will last for another 4 years Interest earned on oregon suit in the next 4 years({631-400) *1.09*1.09*1.09*1.09} - 231= 326-231 = 95 Total Amount after 12 years(231 +95) 326.00 Thus oregon suit is better as after 12 years we will still have 326. Noeway Suit Oregon Suit Cost of suit 1,000.00 400.00 No of dives 300.00 100.00 b) 50 dives per year No of years suit will last 6.00 2.00 Interest earned on oregon suit in the first 2 years({1000-400) *1.09*1.09} - 600= 713 -600 =113 113.00 Total Amount after 2 years(600+113) 713.00 Then after 2 years Oregon suit will be purchased again and it will last for another 2 years Interest earned on oregon suit in the nextt 4 years({713-400) *1.09*1.09} -313= 372-313 = 59 59.00 Total Amount after 4 years((313+59) 372.00 Now we have to get another 28(400-372) to purchase oregon suit and it will last for 2 years and noeway suit has still 2 years left in it. Thus Noeway suit is better if 50 dives per year.
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