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Homework answers / question archive / SOLVE 8 TO 12 (SHOW SOLUTION) PLEASE WHEN ANSWERING IN WRITTEN FORM

SOLVE** 8 TO 12 **(SHOW SOLUTION)

PLEASE WHEN ANSWERING IN __WRITTEN FORM __MAKE IT CLEAR AND UNDERSTANDABLE

8.In recent years, 20% to 25% of new vehicles were leased.

The main elements of a typical lease contract are as follows:

- The lessee makes fixed beginning-of-month payments for the term of the lease.
- The most common term is four years.
- The lessee is responsible for all vehicle operating costs (including insurance) during the term of the lease. In this respect, leasing does not differ from owning a vehicle.
- Most leases are "closed-end" or "walk away" leases. At the end of the term, the lessee can simply return the vehicle to the car dealer. Alternatively, at the option of the lessee, the vehicle may be purchased for a predetermined amount (called the residual value). The residual value represents the dealer's estimate of the market value of the vehicle at the end of the lease.
- The interest rate on a lease is applied as a monthly compound rate. Therefore, the monthly lease payments form a
**Simple Annuity Due**. The dealer suggests leasing as an alternative.

You pay $1,002 down and lease the car for the 4 years, paying only on the portion of the car used, $15,935.97. The tax rate in your province is 11.6% and you are charged tax on the portion of the car used. What is the value of the $15,935.97 lease with tax @ 11.6% minus the $1,002 down payment?

Round your answer to two decimal places. Do not enter the dollar sign. Sample input: 24562.23

*(Hint: Just work out the tax on the portion on the portion of the car used; then subtract the down payment from this value. No annuity calculations needed here!)*

*9.*You end up leasing $16,704.7 after the down payment and taxes for 3 years. The interest rate is 1.55% compounded monthly. (Interest rates are lower on leases as compared to financing) Calculate the monthly lease payment due at the beginning of the month.

Round your answer to two decimal places. Do not enter the dollar sign. Sample input: 24562.23

*(Hint: The down payment has already been taken off. So find the PMT value in the Simple Annuity Due formula using your leased amount. You can also use the TVM solver to find PMT.)*

*10.*You end up leasing $18,073.08 after the down payment and taxes for 4 years. The interest rate is 2.13% compounded monthly. The lease payment is monthly and due at the beginning of the month. How much has been paid, on the lease, over the 4-year period?

Round your answer to two decimal places. Do not enter the dollar sign. Sample input: 24562.23

*(Hint: The down payment has already been taken off. So find the PMT value in the Simple Annuity Due formula using your leased amount. You can also use the TVM solver to find PMT. Then find the total value of these monthly payments over the length of the lease; i.e., take your PMT and multiply by the total number of payments you make.)*

*11.*You end up leasing $15,936.16 for 3 years. Your down payment was $1,321. The interest rate is 2.47% compounded monthly. The lease payment is monthly and due at the beginning of the month.

After 3 years, there is residual owing on a leased vehicle. You have the option of returning the vehicle after a lease term or buying it out. Assume you choose to purchase the vehicle after the lease term and have saved for this opportunity. You pay the $10,547 residual plus tax at 12%. What is the total amount you have paid to own this car?

Round your answer to two decimal places. Do not enter the dollar sign. Sample input: 24562.23

*(Hint: The down payment has already been taken off. So find the PMT value in the Simple Annuity Due formula using your leased amount. You can also use the TVM solver to find PMT. Then find the total value of these monthly payments over the length of the lease; i.e., take your PMT and multiply by the total number of payments you make. Add the total value of your lease payments, your down payment, and the residual value with tax to get the total value of the lease.)*

*12.*You end up leasing $16,719.52 for 4 years. Your down payment was $1,109. The interest rate is 1.38% compounded monthly. The lease payment is monthly and due at the beginning of the month.

After 4 years, there is residual owing on a leased vehicle. You have the option of returning the vehicle after a lease term or buying it out. Assume you choose to purchase the vehicle after the four year lease and have saved for this opportunity. You pay the $13,650 residual plus tax at 13%.

Assume you drove 46,224 km in the 4 years. What was the cost per km per year for the leased vehicle?

Round your answer to two decimal places. Do not enter the dollar sign. Sample input: 4.12

*(Hint: The down payment has already been taken off. So find the PMT value in the Simple Annuity Due formula using your leased amount. You can also use the TVM solver to find PMT. Then find the total value of these monthly payments over the length of the lease; i.e., take your PMT and multiply by the total number of payments you make. Add the total value of your lease payments, your down payment, and the residual value with tax to get the total value of the lease; take this figure and divide it by the length of your lease in years. This will tell you how expensive it is to drive the car for one year. Then find how many km you drive in a year. Divide these two figures, and you can find the cost to drive per kilometer -- it will probably shock you! )*