Question

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?

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.

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