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May 26th, 2013, 04:42 PM   #1
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Simple Interest

Jonas recently purchased a one-year membership at Gold's gym. He can add a second year to the membership now for $1215, or wait 11 months and pay the regular single year price of $1280. Which is the better economic alternative if money is worth 8.5%? At what discount rate would the alternatives be equivalent?

I appreciate any help I can get on this one. Thanks!
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May 26th, 2013, 07:46 PM   #2
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Re: Simple Interest

Hint: interest @ 8.5% for 1 month on 1215 = .085/12 * 1215 = 8.60625, or 8.61 rounded
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