Julia currently is considering the purchase of some land to be held as an investment.
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1.     Julia currently is considering the purchase of some land to be held as an investment. She and the

seller have agreed on a contract under which Julia would pay $1,000 per month for 60 months, or $60,000 total. The seller, not in the real estate business, acquired the land several years ago by paying $10,000 in cash.

Two alternative interpretations of this transaction are (1) a price of $51,726 with 6 percent interest and (2) a price of $39,380 with 18 percent interest. Which interpretation would you expect each party to prefer? Why? Please show all the work.

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