While reading a recent issue of Health & Fitness, a trade journal, Brandon Wilde

Question

While reading a recent issue of Health & Fitness, a trade journal, Brandon Wilde noticed an ad for equipment he had been seeking for use in his business. The ad offered oxygen therapy equipment under the following terms:

Model BL 44582
$204,000 zero interest loan
Quarterly payments of $17,000 for only 3 years

The ad captured Wilde's attention, in part because he recently had been concerned that the interest charges incurred by his business were getting out of line. The price, though, was somewhat higher than prices for this model he had seen elsewhere.

Write a business letter to advise Mr. Wilde on the purchase he is considering. Provide quantitative analysis (in a supporting schedule) of the costs involved in this zero interest loan for the duration of the loan to support your advice.

Explanation / Answer

To Brandon Wilde, I think that the zero percent interest system is the best system to purchase of oxygen therapay equipments. I am herewith submitting the caluculations regarding the purchase of oxygen therapy equipment with the given terms and conditions. Loan amount                    $204,000 Interest rate                         0% Quarterly payment amount $17,000 Tenure of the loan                 3years=36months=36/3=12Quarters. Total payments in 12 Quarters = $17,000*12=$204,000 Here the loan amount is equal to quarter amounts payments.Hence there will be no loss to buy the equipments in this system. In zero percent interest system we are not paying any extra amounts. Loan amount is divided by tenure of the loan. Hence, there will no extra amounts. This system is useful to buyers to get the items without any paying interest.This system is very easy to buy the articles.

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