Homework #6: buy with cash or finance a purchase

Deciding whether to pay cash or finance a purchase. Use Worksheet 7.2. Matilda Edwards wants to by a home entertainment center. Compete with a big-screen TV DVD, and sound system the unit would cost $4500. Matilda has over $15,000 in a money market fund, so she can easily afford to pay cash for the whole thing ( the fund is currently paying 3 percent interest, and Matilda expects that yield to hold for the foreseeable future). To stimulate sales, the dealer is offering to finance the full cost of the unit with  36-month, simple interest installment loan at 6 percent.

Matilda wants to know whether she should pay cash for the home entertainment center or buy it on time. Matilda does not itemize deductions on her income tax. Briefly explain her best choice after completing the worksheet.

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