Jeremy Has a Number of Outstanding Credit Cards Debts

question 29

Multiple Choice

Jeremy has a number of outstanding credit cards debts. He seeks help from BDO to consolidate his debts and make it easy for him to make the debt payments. BDO offers him two alternatives. In the first alternative, the debt can be settled by making a payment of $30 000 now and a final payment of $42 000 in 3 years. Alternatively, the obligation can be settled by payments of $8400 at the end of every three months for three years. Which alternative is preferred and by how much if the interest is 13.5% compounded quarterly.

• A) Alternative 1
• B) Alternative 2
• C) Neither Alternative
• D) Don't take offer from the BDO
• E) Alternative 1 or Alternative 2, as both are essentially same