The Apex Company sold a water softener to Marty Smith. The price of the unit was

Question

The Apex Company sold a water softener to Marty Smith. The price of the unit was $350. Marty asked for a deferred payment plan, and a contract was written. Under the contract, the buyer could delay paying for the water softener if he purchased the coarse salt for recharging the softener from Apex. At the end of the 2 years, the buyer was to pay for the unit in a lump sum, with interest at 1.5% per quarter-year. According to the contract, if the customer ceased buying salt from Apex at any time prior to 2 years, the full payment due at the end of 2 years would automatically be due. Six months later, Marty decided to buy salt elsewhere and stopped buying from Apex, whereupon Apex asked for the full payment that was to have been due 18 months hence. Marty was unhappy about this, so Apex offered as an alternative to accept the $350 with interest at 10% per semiannual period for the 6 months that Marty had been buying salt from Apex. Which of these alternatives should Marty accept? Explain. please can u explain the work because it is require thnx

Explanation / Answer

Payment that would have been due at the end of 2 years: $350 x (1+0.015)(4x2) = $394.27 $350 x (1+0.015)(8) = $394.27 Payment due at 6 months and 10% per 6 months: $350 x (1+.10)1 = $385.00 Since $385.00 is less than $394.27, the alternate plan is the better choice $385 is a better plan

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