3. You want the new top of the line mobile phone. Which is a better option?

Option 1) You purchase the phone for $1,554 plus 12% taxes and you keep your monthly phone service plan. You currently pay $50 plus 12% taxes per month for this plan. You pay one month ahead.

Option 2) You lock into a monthly phone service plan (same plan features as above) for $129.33 plus 12% taxes per month for two years. This subscription offers the same phone as above for $0. Monthly plan payments are made one month ahead.

Assume for both options an annual discount rate of 3.5%.