Question

You have been sent a bill of $1064. You can choose to pay upfront ($1064) or pay over 4 installments ($266 for each installment). Given that the company won't charge any interest if you pay before the due date(s), would it be better to pay upfront or over 4 installments?

Answer 1

IT WILL BE BETTER TO PAY IN INSTALLMENTS THAN PAYING FRONT

DUE TO THE CONCEPT OF TIME VALUE OF MONEY

The time value of money (TVM) is the concept that money you have now is worth more than the identical sum in the future due to its potential earning capacity. This core principle of finance holds that provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also sometimes referred to as present discounted value.

The time value of money draws from the idea that rational investors prefer to receive money today rather than the same amount of money in the future because of money's potential to grow in value over a given period of time.

For example, money deposited into a savings account earns a certain interest rate and is therefore said to be compounding in value.

here if you have invested 1064 in a savings account and paid interest annually there would be a definite increase in the money value rather if you have given money upfront then you wont be able to earn anything on it.