[Hidden-tech] A math question...

[Scott Cooper]

There are really two ways to look at this - either as a discount for paying
in advance, or a fee for spreading out your payments.

(One note - the info you have shared isn't enough to calculate an APR.  A
rate depends on time, so to figure this as a rate, we would have to know
the frequency of the payments - are they monthly? quarterly? some other
interval?)

In his answer, as he mentioned, Robert calculated the difference between
the two prices as a 37% discount for paying in advance. From that
viewpoint, we look at it as a percentage of the higher price.

If we want to think about it as an extra cost for the convenience of
spreading out our payments, we would want to calculate it as a percent of
the lower figure - $591 / $997 = 59%.  So, it's 59% extra if you want to
make payments, which is definitely a pretty steep "convenience fee".

(Side note, getting back to APR - if, for example, these are monthly
payments, and we do want to think of it as an interest rate, it comes out
to 177%  - 59% * 4 /12)

Finally, I'd offer the thought that whether this is a rip-off or not really
depends on the value of what they're selling.  Is it something worth $1500
and you're getting a big discount for paying up front?  Or is it worth
$1000 and you're paying a big fee for the convenience of spreading out the
cost?  For some people, even that big fee might be worth it, if they just
had no way to come up with all the money at once.

Finally, my apologies if this is too "lessonish" - I've taught math on and
off for years and do have a tendency to be a bit long-winded with my
explanations.

On Sat, Aug 22, 2020 at 6:30 PM Robert Heller via Hidden-discuss <
hidden-discuss at lists.hidden-tech.net> wrote:

> At Sat, 22 Aug 2020 19:40:21 +0000 (UTC) Marcia Yudkin <
> yudkinyudkin at yahoo.com> wrote:
>
> >
> > I saw a course costing $997 if you paid all at once also having a payment
> > plan of 4 payments of $397 each.Â
> >
> > Can someone help me translate those numbers into a monthly interest rate,
> > like an APR?
>
> It would not normally be stated as a monthly interest rate, but rather as a
> pre-paid ("cash") discount. In this case, about %37 off if paid in full up
> front.
>
> 397*4 = 1588
> 1588-997 = 591
> 591/1588 = .37216 == 37%
>
> >
> > Thanks so much!  This seems pretty outrageous, and I'd like to be able
> to
> > quantify just how outrageous.
> >
> > Marcia Yudkin
> > Goshen
> > http://www.yudkin.com
> >
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