Chillingsworth Has a Neighbor, Shivers, Who Faces the Same

question 21

Multiple Choice

Chillingsworth has a neighbor, Shivers, who faces the same options for insulating his house as Chillingsworth.But Shivers has a larger house.Shivers's annual fuel bill for home heating is 1,200 dollars per year.Plan A will reduce his annual fuel bill by 15%, plan B will reduce it by 20%, and plan C will eliminate his need for heating fuel altogether.The plan A insulation job would cost Shivers 1,200 dollars, plan B would cost him 1,700 dollars, and plan C would cost him 13,200 dollars.If the interest rate is 10% and his house and the insulation job last forever, which plan is the best for Shivers?

• A)Plan A.
• B)Plan B.
• C)Plan C.
• D)Plans A and B are equally good.
• E)He is best off using none of the plans.

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Definitions:

Grow Amount

Increasing the value of a financial asset through investment or saving strategies.

Simple Annual Interest

Interest calculated on the principal amount only, without compounding, over a one-year period.

Grow Amount

A term not widely recognized in finance; the closest concept might be "growth amount," which refers to the increase in value or size of an investment or financial metric over a period.

Simple Annual Interest

Interest calculated once per year on the principal amount only, not on previously earned interest.