A consumer faces the following decision: She can buy a computer for $1000 and $10 per month for Internet access for three years, or she can receive a $400 rebate on the computer (so that its cost is $600) but agree to pay $25 per month for three years for Internet access. For simplification, assume that the consumer pays the access fees yearly (i.e., $10 per month = $120 per year).
a. What should the consumer do if the interest rate is 3 percent?
b. What if the interest rate is 17 percent?
c. At what interest rate will the consumer be indiffer- ent between the two options?