You are the office manager of the Orthopedic Sports Clinic.Your physicians would like to purchase a piece of equipment that will cost the practice $100,000.You can purchase the equipment through the dealer's finance company over time and it will cost an additional $12,000 in interest.
A. What is the effective annual interest rate you will be paying using each of the following methods?
1. Simple Interest
2. Discount Interest
3. Add-On Interest
B. If the dealer's finance company requires you to repay the principal and interest in monthly installments, would it be better to finance the equipment at your local bank which is offering a 15% interest rate?Explain your answer.