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Read the following letter from a magazine publisher Dear Parent Currently your Growing Child/Growing Parent subscription will expire with your 24-month issue To renew on an annual basis until your

Read the following letter from a magazine publisher: Dear Parent: Currently your Growing Child/Growing Parent subscription will expire with your 24-month issue. To renew on an annual basis until your child reaches 72 months would cost you a total of $63.84 ($15.96 per year). We feel it is so important for you to continue receiving this material until the 72nd month, that we offer you an opportunity to renew now for $57.12. Not only is this a savings of 10% over the regular rate, but it is an excellent inflation hedge for you against increasing rates in the future. Please act now by sending $57.12.

(a) If your money is worth 6% per year, determine whether this offer can be of any value.

(b) What rate of interest would make you indifferent between the two renewal options?

Apr 29 2020 View more View Less

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