The local electronics store is offering a promotion "1-year: same as cash," meaning that you can buy a TV now, and wait a year to pay (with no interest). So, if you take home a $ 1 comma 150 TV today, you will owe them $ 1 comma 150 in one year. If your bank is offering 4 % interest, what is the true cost of the TV to you today?

Real cost of the tv = $1104

Explanation:

Giving the following information:

You can buy a TV now, and wait a year to pay (with no interest).

So, if you take home a $ 1,150 TV today, you will owe them $ 1,150 in one year.

Your bank is offering 4 % interest, you can lend the $1,150 to the bank and profit from the interest generated.

We need to use the following formula:

FV = PV * (1+i) ^n

FV = Final value

PV = present value

i = interest rate

n = number of years

FV = 1150 * (1.04) ^1 = $1196

Real cost of the tv = 1150 - 46 = $1104