Question

A car dealership is ready to give you a $25,000 car on a lease for 48 months at 6% interest rate per year (or 6% divided by 12 = 0.5% per month). What will be your monthly lease payments which are made at the beginning of the months, if you agree to make a lumpsum payment of $6,500 at the end of the lease term to own the car after the lease term is over?

$486.75

$478.24

$466.97

$464.65

(I need to know how to answer this in excel)

Answer #1

Cost of the car = $25,000. Time = 48 months. Rate = 6% interest rate per year or 0.5% per month effectively. All the monthly lease payments are made at the beginning of the months, and there is a lumpsum payment of $6,500 at the end of the lease term. Find the monthly payment X

25000 = X + X(P/A, 0.5%, 47) + 6500(P/F, 0.5%, 48)

25000 = X + X*PV(0.5%,47,-1) + PV(0.5%,48,0,-6500)....................... corresponding excel formulas

(25000 - 5116.14) = X*(1 + 41.79)

X = (25000 - 5116.14)/42.79

= 464.68

Last option is correct

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