Veronique and Lily each bought a piece of luggage that had the same price in different stores. The table below shows how they will pay for the item.
| Name | Payment Type | Payment Amount (Including Finance Charges) | Number of Months to Pay for Item |
|------------|----------------|---------------------------------------------| -----------------------------------|
| Veronique | Store financed | $25 | 10 |
| Lily | Credit card | $35 | 7 |
Who made the better financial decision and why?
A. Veronique because her payments are lower.
B. Veronique because her final cost, including finance charges, is less than Lily's.
C. Lily because she is paying off her purchase sooner.
D. Lily because her final cost, including finance charges, is less than Veronique's.
Answer (2)
Calculate Veronique's total cost: $25 \times 10 = $250.
Calculate Lily's total cost: $35 \times 7 = $245.
Compare the total costs: Lily's total cost ($245) is less than Veronique's ($250).
Lily made the better financial decision because her final cost is less. Lily because her final cost, including finance charges, is less than Veronique’s.
Explanation
Problem Analysis Let's analyze Veronique and Lily's payment plans to determine who made the better financial decision. We need to calculate the total cost for each person and compare them.
Veronique's Total Cost Veronique's payment plan involves paying $25 per month for 10 months. To find her total cost, we multiply the monthly payment by the number of months: 25 × 10 = 250 So, Veronique's total cost is $250.
Lily's Total Cost Lily's payment plan involves paying $35 per month for 7 months. To find her total cost, we multiply the monthly payment by the number of months: 35 × 7 = 245 So, Lily's total cost is $245.
Comparison and Conclusion Now, let's compare the total costs. Veronique's total cost is $250, and Lily's total cost is $245. Since $245 is less than $250, Lily's final cost is less than Veronique's. Therefore, Lily made the better financial decision.
Examples
Understanding payment plans and comparing total costs is essential in personal finance. For example, when buying a car, you might have the option of a lower monthly payment but over a longer period, or a higher monthly payment over a shorter period. Calculating the total cost, including interest, helps you make an informed decision about which option saves you more money in the long run. This same principle applies to mortgages, loans, and even subscription services.
Lily made the better financial decision because her total cost of $245 is lower than Veronique's total cost of $250. This means Lily paid less overall for her luggage. Therefore, option D is the correct choice.
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