Your car dealer is willing to lease you a new car for $359 a month for 48 months

Question

Your car dealer is willing to lease you a new car for $359 a month for 48 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 4.6 percent, what is the current value of the lease?

Your car dealer is willing to lease you a new car for $359 a month for 48 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 4.6 percent, what is the current value of the lease?

Explanation / Answer

This is Annuity Due problem.

Annuity Due PVA = PMT + PMT [(1+r)n-1 - 1] / [r (1+r)n-1]

PMT = 359

n = 48

r = 4.6 % / 12 = 0.38333% = 0.0038333

PVA =359 + 359 * [(1+ 0.0038333)47 - 1] / [0.0038333 (1+ 0.0038333)47] }

PVA = 15,772.40

Current value of lease = $15,772.40

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.