# Finance

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A grocery store manager must decide whether to buy four rug cleaners to rent to customers. The manager estimates that the first would yield \$200 a year, the second \$150, the third \$75, and the fourth \$20. If the interest rate is 12 percent and each rug cleaner costs \$500, how many should the manager buy? a. none b. two c. one d. four e. three

The answer is three, but how do I get it?

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Popioo

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I'm thinking it's a function of saving the money in an account that earns the 12% (compounded monthly) over the 4 year period.

\$500 saved @ an annual rate of return of 12% (again, compounded monthly) yields \$806.11 - or \$306.11 of interest, which comes to \$76.73 of interest returned per year - \$1.73 better than the \$75 per year yield on the fourth rug cleaner.

I used a simple savings calculator to help calculate my answer.

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