Zaineb is deciding whether to buy a stereo at $695 plus GST and PST (15%) now, or to invest the money to buy the stereo in a year. Her account pays 7.35% per annum, compounded monthly. If she can buy the stereo at the same price next year, how much would she save by investing the money?

Question

anonymous · Answer

GST and PST is 15%

anonymous · Answer

I tried:

Zaineb buys a stereo at $695 plus GST and PST now... 

P = 695
i = 0.15(2) = 0.30
n = 0

A = P(1+i)
   = 695(1 + 0.30)
   = 903.5

Zainet invest the money to buy the stereo in a year...

P = 695
i = 0.0735/12 = 0.006125
n = 1(12) = 12

A = 695(1 + 0.006125)^12
   = 747.84

Interest earned for buying the stereo now = Amount - Principle
                        = 903.5 - 695
                        = 208.5

Interest earned for buying the stereo next year = Amount - Principle
                                                                         = 747.84 - 695
                                                                         = 52.84

The answer at the back of my book is $60. 76