Suppose That You Have a Coupon Which Offers a Price

question 4

Essay

Suppose that you have a coupon which offers a price reduction of 10% plus one of the following options.
Option 1: Add an extra 5% to your coupon for a total discount of 15%.
Option 2: Add a price reduction of $8 to your coupon after removing the 10%.
Is one option always better than the other option? Explain.

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Definitions:

Profits

The financial gain achieved when the revenues from business activities exceed the expenses, costs, and taxes involved in sustaining the activity.

Revenue

The total amount of money generated by a company from its business activities, such as sales of products or services, before any expenses are deducted.

Futures Contract

A formal legal contract to purchase or sell a specific commodity or financial instrument at an agreed-upon price at a future date.

Lifetime Low

The lowest price level that a security or market index has reached over the entire period it has been traded.