A local car dealer is advertising a standard 24-month lease of $1, 150 per month

Question

A local car dealer is advertising a standard 24-month lease of $1, 150 per month for its new XT 3000 series sports car. The standard lease requires a down payment of $4, 500, plus a $1,000 refundable initial deposit now. The first lease payment is due at the end of month 1. In addition the company offers a 24-month lease plan that has a single up-front payment of $30, 500, plus a refundable initial deposit of $1,000. Under both options, the initial deposit will be refunded at the end of month 24. Assume an interest rate of 6% compounded m With the present worth criterion, which option is preferred?

Explanation / Answer

option 1:
-4500-100-1150(P/A,.5%,24)- 1000(P/F,.5%,24)

option 2
-31,500+1000(P,F,.5%,24)

* the .5 is because you have 6/12

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