A man wants to sell his scooter. There are two offers: one at Rs. 12,000 cash and the other a credit of Rs. 12,880 to be paid after 8 months, money being at 18% per annum. Which is the better offer?

Rs. 12,000 in cash
Rs. 12,880 at credit
Both are equally good

Correct answer: Rs. 12,000 in cash

Solution

The present value of Rs. 12,880 due after 8 months at 18% per annum is less than Rs. 12,000. Therefore, the cash offer is better.

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