High inflation question:
Given 40% inflation. An item is offered for $1200 in 12 "zero interest" payments of $100 or $800 in cash.
How do you compare their real cost taking into account inflation?
Given 40% inflation. An item is offered for $1200 in 12 "zero interest" payments of $100 or $800 in cash.
How do you compare their real cost taking into account inflation?
Assuming the $100 payments are paid at the end of each month, the value of the money sent over in today's dollars is $((100/c^1) + (100/c^2) + (100/c^3) + ... + (100/c^12)) which is a geometric series with ratio 1/c, so the sum is (100/c^1 - 100/c^(12+1))/(1-1/c) ≈ $1005.
So take the cash offer.
For spreadsheet calculations, look into the SERIESSUM flavor of macros.
(though from an academic point of view you are completely correct)