Varlyn has saved $3,500 that will be a down payment on a new car that can be pur
ID: 2650912 • Letter: V
Question
Varlyn has saved $3,500 that will be a down payment on a new car that can be purchased for $24,859.
Varlyn has been offered a three-year lease for this car with payments of $387.00 a month for 3 years. A down payment of $1,000 is required at the time the car is received. The first lease payment would start a month later. As happens with leases, he would essentially receive the full value of the car today and he would return the car to the dealer at the end of the lease (essentially paying out the value of the car at that time). The value of this car in 3 years, with no damage or excessive mileage, is expected to be $16,000. What NAR with monthly compounding would he be paying for this lease?
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The loan to finance this will have a rate of 3.125% NAR compounded monthly. What will the monthly payments on the car be if the loan is for 3 years? How long would it take to pay off the loan if he would pay $500 monthly?Varlyn has been offered a three-year lease for this car with payments of $387.00 a month for 3 years. A down payment of $1,000 is required at the time the car is received. The first lease payment would start a month later. As happens with leases, he would essentially receive the full value of the car today and he would return the car to the dealer at the end of the lease (essentially paying out the value of the car at that time). The value of this car in 3 years, with no damage or excessive mileage, is expected to be $16,000. What NAR with monthly compounding would he be paying for this lease?
Show calculations/formulas in Excel.
Explanation / Answer
Varlyn has saved $3,500 that will be a down payment on a new car that can be purchased for $24,859.
The loan to finance this will have a rate of 3.125% NAR compounded monthly. What will the monthly payments on the car be if the loan is for 3 years?
Monthly payments = pmt(rate,nper,pv,fv)
rate = 3.125%/12
nper = 3*12 = 36
pv = 24859
fv = 0
Monthly payments = pmt(3.125%/12,36.-24859,0)
Monthly payments = $ 724.30
How long would it take to pay off the loan if he would pay $500 monthly?
No of month =nper(rate,pmt,pv,fv)
rate = 3.125%/12
pmt = 500
pv = 24859
fv = 0
No of month = nper(3.125%/12,500,-24859,0)
No of month = 53.31
No of Year = 53.31/12 = 4.44 Years
Varlyn has been offered a three-year lease for this car with payments of $387.00 a month for 3 years. A down payment of $1,000 is required at the time the car is received. The first lease payment would start a month later. As happens with leases, he would essentially receive the full value of the car today and he would return the car to the dealer at the end of the lease (essentially paying out the value of the car at that time). The value of this car in 3 years, with no damage or excessive mileage, is expected to be $16,000. What NAR with monthly compounding would he be paying for this lease?
Show calculations/formulas in Excel.
NAR = rate(nper,pmt,pv,fv) *12
nper = 3*12 = 36
pmt = 387
pv = 24859-1000 = 23859
fv = 16000
NAR = rate(36,387,-23859,16000)*12
NAR = 10%
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