AWS Certified Cloud Practitioner (CLF-C02)Billing, Pricing, and SupportHard
A financial analyst compares three payment options for a 1-year Standard Reserved Instance, assuming the instance runs continuously for all 8,760 hours in the year: No Upfront at an effective rate of $0.100 per hour, Partial Upfront with a $400 upfront fee plus $0.050 per hour, and All Upfront with a single payment of $850. Which payment option results in the lowest total annual cost?
- APartial Upfront, totaling $838
- BAll Upfront, totaling $850
- CNo Upfront, totaling $876
- DAll three options cost the same over the year
Show answer & explanationAnswer & explanation
Correct answer: A. Partial Upfront, totaling $838
No Upfront costs 0.100 x 8,760 = $876. Partial Upfront costs 400 + (0.050 x 8,760) = 400 + 438 = $838. All Upfront costs a flat $850. Comparing the three totals ($876, $838, $850), Partial Upfront yields the lowest annual cost.
Why the other options are wrong
- B. All Upfront totals $850, higher than Partial Upfront in this scenario.
- C. No Upfront totals $876, which is the highest of the three options.
- D. The three totals differ ($876, $838, $850), so they are not equal.
RI Payment Options Cost Comparison
Reserved Instances can be purchased No Upfront, Partial Upfront, or All Upfront; the cheapest option depends on the specific upfront fee and hourly rate combination, not a fixed rule.
- No Upfront: pay only an hourly rate, no discount for prepayment
- Partial Upfront: pay a portion upfront for a lower hourly rate
- All Upfront: pay the full commitment upfront, often the largest discount but not always cheapest depending on rates given
Memory trick: Do the math each time — upfront isn't always cheapest