Your car dealer is willing to lease you a new car for $399 a month for 60 months
ID: 2776150 • Letter: Y
Question
Your car dealer is willing to lease you a new car for $399 a month for 60 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 5.0 percent, what is the current value of the lease?
Your car dealer is willing to lease you a new car for $399 a month for 60 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 5.0 percent, what is the current value of the lease?
$21,146.91 $22,260.32 $21,205.39 $21,231.39 $22,325.32Explanation / Answer
Current value of the lease = Monthly payment * [1 - 1 / (1+rate of interest/12)No. of months] * (1+rate of interest/12) / rate of interest/12
= $399 * [1 - 1 / (1+5%/12)60] * (1+5%/12) / (5%/12)
= $21,231.39 which is the 4th option.
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