Question

You are thinking about leasing a car, and the dealer offers you the following deal: You...

You are thinking about leasing a car, and the dealer offers you the following deal: You can drive the $23,000 car off the lot today, with no upfront payment if you agree to make monthly payments of $375.22 for five years.   At the end of the lease, you can keep the car if you pay out a residual value price of $4,000.  What is the annual rate of interest embedded in this lease arrangement?

Homework Answers

Answer #1
Calculator
Inputs:
PV              23,000.000
PMT                       (375.2)
FV                   4,000.00
N                              60
Output:
I/Y = IRR -0.8752%
Yield to maturity -10.50%

Answer is 10.50%

please rate.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
After deciding to get a new car, you can either lease the car or purchase it...
After deciding to get a new car, you can either lease the car or purchase it with a four-year loan. The car you wish to buy costs $37,000. The dealer has a special leasing arrangement where you pay $103 today and $503 per month for the next four years. If you purchase the car, you will pay it off in monthly payments over the next four years at an APR of 7 percent, compounded monthly. You believe that you will...
After deciding to buy a new car, you can either lease the car or purchase it...
After deciding to buy a new car, you can either lease the car or purchase it on a two-year loan. The car you wish to buy costs $32,000. The dealer has a special leasing arrangement where you pay $93 today and $493 per month for the next two years. If you purchase the car, you will pay it off in monthly payments over the next two years at an APR of 7 percent. You believe you will be able to...
You are leasing a car for 48 months. You put down $2000 now and agree to...
You are leasing a car for 48 months. You put down $2000 now and agree to $500 monthly payments. The residual value is $15,000. The financing rate is 8% (monthly compounded). How much is the car worth? The car is worth $ ……………………………………. today. The annual equivalent of the financing rate is EAR = …………………………………. %
After deciding to get a new car, you can either lease the car or purchase it...
After deciding to get a new car, you can either lease the car or purchase it with a four-year loan. The car you wish to buy costs $35,500. The dealer has a special leasing arrangement where you pay $100 today and $500 per month for the next four years. If you purchase the car, you will pay it off in monthly payments over the next four years at an APR of 7 percent, compounded monthly. You believe that you will...
The following article does a good job of breaking down the advantages/disadvantages of leasing vs. purchasing...
The following article does a good job of breaking down the advantages/disadvantages of leasing vs. purchasing vehicles: Title: Pros and Cons of Leasing vs. Buying a Vehicle Source: http://www.investopedia.com/articles/pf/05/042105.asp Buying a car can be overwhelming. In fact, the pleasure of getting a new car can be quickly clouded during the financing decision-making process and price negotiations. Besides price haggling, many car shoppers are plagued with the decision to leaseor buy. Which financing decision is right and why? This article will...
You are planning to acquire a new car with a negotiated purchase price of $50,000. You...
You are planning to acquire a new car with a negotiated purchase price of $50,000. You prefer to turn your cars over after 4 years. You have two financing choices: lease or borrow & buy. You can obtain a four-year loan at 6% annual rate (which means 0.5% monthly rate) for the entire purchase price of the car. A four-year lease (equal monthly lease payments start immediately) requires a down payment of $4,000. The market value of the car is...
You are planning to acquire a new car with a negotiated purchase price of $50,000. You...
You are planning to acquire a new car with a negotiated purchase price of $50,000. You prefer to turn your cars over after 4 years. You have two financing choices: lease or borrow & buy. You can obtain a four-year loan at 6% annual rate (which means 0.5% monthly rate) for the entire purchase price of the car. A four-year lease (equal monthly lease payments start immediately) requires a down payment of $4,000. The market value of the car is...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT