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Homework answers / question archive / 1) You are thinking of leasing a car

1) You are thinking of leasing a car

Finance

1) You are thinking of leasing a car. The price of the car is ?$55,000. You have ?$3,000 for a down payment. The term of the lease is four years and the interest rate is 3.5?% APR. The buyout on the lease is? 51% of its purchase price and it is due at the end of the term. What are the monthly lease payments? (before tax)?

2) You are thinking of leasing a car. The price of the car is ?$60,000. You have ?$4,000 for a down payment. The term of the lease is five years and the interest rate is 3?% APR. The buyout on the lease is? 51% of its purchase price and it is due at the end of the term. What are the monthly lease payments? (before tax)?

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1) We can calculate the monthly lease payments by using the following formula in excel:-

=pmt(rate,nper,-pv,fv)

Here,

Pmt = Monthly lease payments

Rate = 3.5%/12 = 0.29167% (monthly)

Nper = 4*12 = 48 periods (monthly)

PV = $55,000 - $3,000 = $52,000

FV = $55,000*51% = $28,050

Substituting the values in formula:

= pmt(0.29167%,48,-52000,28050)

= $617.24

2) We can calculate the monthly lease payments by using the following formula in excel:-

=pmt(rate,nper,-pv,fv)

Here,

Pmt = Monthly lease payments

Rate = 3%/12 = 0.25% (monthly)

Nper = 5*12 = 60 periods (monthly)

PV = $60,000 - $4,000 = $56,000

FV = $60,000*51% = $30,600

Substituting the values in formula:

= pmt(0.25%,60,-56000,30600)

= $532.90

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