Question: part 2 mary would like to purchase a touring bike...
Part 2. Mary would like to purchase a touring bike. After extensive research online and visiting at a few local bike shops, she decided to purchase the newly released carbon adventure bike for $4,000.
(a) The first bike shop is currently offering a deal of 12 equal monthly repayments with no interest charges. What cash amount should the shop be willing to accept instead of the no-interest plan? By considering the current saving interest as 3% per year which compounded monthly. (11 Marks)
(b) Alternatively, another bike store (the second bike shop) offers the same no-interest plan but require a 4% deposit and an establishment fee of $20 both of which are payable immediately (at the time of purchase). The second store also charges an account keeping fee of $2.90 per month due with each payment. What cash amount should the second store be willing to accept with its no-interest plan on the same bike which ticketed at $4,000? In this case, you can assume the second store value money at 6% per year compounded monthly. (14 Marks)
(c) Which shop offers a better deal for Mary? Explain briefly (2-3 sentences).