Question: The only difference between two contracts to purchase a new laptop is that the one vendor wants to be paid at the beginning of each month, starting immediately, wheras the other vendor wants to be paid at the end of each month. This is the difference between present value calculated as an ordinary annuity and the present value of an annuity due. Assume Ashley decides to make payments of $100 per month for 15 months at an an annual discount rate of 8%.
How much would Ashley save on the laptop if she chose the vendor that wanted to be paid at the end of the month?