Question

Sophie leased equipment worth $35,000 for 9 years. If the lease rate is 6.75% compounded monthly,...

Sophie leased equipment worth $35,000 for 9 years. If the lease rate is 6.75% compounded monthly, calculate the size of the lease payment that is required to be made at the beginning of each month.

Homework Answers

Answer #1

Information provided:

Present value= $35,000

Time= 9 years*12= 108 months

Monthly interest rate= 6.75%/12= 0.5625%

The question pertains to computing the value of annuity due. Annuity due refers to annuity that occurs at the beginning of a period.

This can be solved using a financial calculator by inputting the below into the calculator:

The financial calculator is set in the end mode.  Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2ndBGN 2ndSET on the Texas BA II Plus calculator.

The question can be solved using a financial calculator by entering the below into the calculator:

PV= -35,000

N= 108

I/Y= 0.5625

Press the CPT key and PMT to compute the value of annuity due.

The value obtained is 433.30.

Therefore, the size of the lease payment is $433.30.

In case of any query, kindly comment on the solution.

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