Suppose you can buy a new car for $15,000 and sell it for $6,00 after six years. Or, you can lease the car to $300 per month for three years and return it at the end of the three years. Assume that lease payments are made yearly instead of monthly (i.e., are $3,600 per year for each of the three years).
a.) If the interest rate, r, is 4 percent, should you lease or buy?
b.) What if the interest rate is 12 percent?
c.) At what interest rate would you be indifferent between buying and leasing the car?
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