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MATH125: Unit 3 Individual Project Answer Form

Logic, Decision Making, and Introduction to Statistics

ALL questions below regarding BUYING and LEASING a car must be
answered. Show ALL step-by-step calculations, round all of your
final price answers correctly to the nearest cent, and include the
units of measurement. Submit this modified Answer Form in the Unit
3 IP Submissions area.

Being well-informed, or at least knowing the right questions to
ask, can save you from being taken advantage of. The purchase of a
car involves so many variables that it is best to have some
understanding before you attempt to purchase a car. There are even
more variables to consider when you lease a car. For the purpose of
this example, you will ignore such things as tax and dealer
rebates. Research the differences between buying and leasing a
car.

BUYING

Choose a car that you wish to own, and find the price of this car.
For this example, only consider new cars to purchase from a
dealership. This will be your principal value, P.

Principal, P $

Research available interest rates on this particular car. This will
be the rate, r.

Rate in decimal form, r

Decide how long you would like to take to pay off this car. Choose
within 2 to 5 years. This will be the time, t.

Time, t

The simple interest formula, I=Prt, can tell you how much interest
will be added to the principal amount of this loan. Calculate the
interest on your loan.

Interest, I $

Show your work here:

How much will you be repaying over the life of your loan?

Total repayment $

Show your work here:

How much are your monthly payments?

Monthly payments $

Show your work here:

Assume that you have 6% to use as a down payment based on the
original purchase price of the car. How much will you be putting
down? What is the new value of P on your lease?

Down payment, D $

New value, P $

Show your work here:

With the down payment, what will the new monthly payments be?

New monthly payment $

Show your work here:

LEASING

Now, consider the option to lease this same car.

The appeal of a lease is a lower interest rate. Subtract 3% from
the original interest rate (from Step 2). If your answer is less
than 0.6%, use the minimum rate of 0.6%.

Reduced rate in decimal form, r

The length of a lease is typically 3–7 years. Choose how long you
wish to lease this car.

Lease time, t

The monthly payment on a lease accounts for the depreciation of the
car’s value. Assume that at the end of your lease, the car has only
retained 40% of its original value (40% of your answer in Step 1).
What is your car’s value at the end of the lease? Use this for your
new value of P.

New value, P $

Show your work here:

How much interest will you be paying over the course of this
lease?

Interest, I $

Show your work here:

What is your total cost—in other words principal plus
interest?

Total Cost $

Show your work here:

How much is your monthly payment?

Monthly payment $

Show your work here:

At the end of the lease, you do not own the car. If you wish to
purchase the car, you would still owe the value of P from Step 11.
At this point, you could turn in the keys and walk away, assuming
the car is in perfect condition and ignoring mileage fees. What are
the benefits and disadvantages to walking away from this car?

Explain your answer here:

Instead of walking away, you could also purchase the car for what
it is now worth, plus the interest. Using P from Step 11, r from
Step 2, and t from Step 3, calculate how much you would repay over
the course of this new loan.

Interest $

Total repayment $

Show your work here:

At the end of the lease, how much did you pay in total for the car?
Be sure to include the lease, Step 13, along with the purchase
price from Step 16.

Total cost of the car $

Show your work here:

Would you consider leasing a car? Discuss the advantages and
disadvantages of buying versus leasing a car.

Explain your answer here:

Answer #1

After deciding to buy a new car, you can either lease the car or
purchase it with a three-year loan. The car costs $30,000. The
dealer has a lease program where you pay $100 today and $400 per
month for the next three years. If you purchase the car, you will
pay it off in monthly payments over the next three years at a 8
percent APR. You believe that you will be able to sell the car for
$20000...

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...

Lease-versus-purchase decision Personal Finance Problem Joanna
Browne is considering either leasing or purchasing a new Chrysler
Sebring convertible that has a manufacturer's suggested retail
price (MSRP) of $33,000. The dealership offers a 3-year lease
that requires a capital payment of $3,500 ($3,100 down payment +
$400 security deposit) and monthly payments of $493. Purchasing
requires a $2,600 down payment, sales tax of 6.4% ($2,112), and
36 monthly payments of $903. Joanna estimates the value of the car
will be $17,000...

Please use Excel
to answer the following TVM questions. You can use this spreadsheet
to set up your calculations if you so desire. Unless indicated
otherwise, assume that all of the problems are ordinary annuities
(payment made at the end of the
period).
Part 3
I am going to
buy a car. I will finance the whole purchase (no down payment) with
a new car loan that has a 6-year term. My monthly payments will be
$392/mth and the annual...

4. You want to buy a new car in 3 years which will cost $42,000.
You plan to get a 5-year car loan at a 6% interest rate but don’t
want your monthly payments to be over $300. You plan to save the
rest needed by making monthly deposits into the bank, earning 7.5%
on your money. How much do you need to save monthly over the next 3
years to reach your goal?
6. You are buying a new...

After deciding to buy a new car, you can either lease the car or
purchase it on a three-year loan. The car you wish to buy costs
$32,500. The dealer has a special leasing arrangement where you pay
$94 today and $494 per month for the next three years. If you
purchase the car, you will pay it off in monthly payments over the
next three years at an APR of 6 percent. You believe you will be
able to...

Part 2 (matlab)
Functions Many of you will have some form of a loan during your
lifetime, either a student loan, mortgage, credit card debt, or
other loan. If you never do have a loan, great! But you may have to
calculate a payment for someone else, such as the company you work
for. Such a loan will have a principal amount (called the present
value), an interest rate, and a number of periods for the loan. The
formula to...

Amy Phillips needs to borrow $20,000 to purchase a new car. She
can get a 3 year loan from her bank with an interest rate of 7%
(compounded monthly). Calculate Amy's monthly payment.
Also how much interest (in dollars) will Amy pay over the life
of the loan?
Lastly, if Amy got a 5 year loan instead of a 3 year loan, how
much interest (in dollars) would she pay over the life of the
loan?
Answer using formulas -...

Problem I) Determine the monthly payment required if you want to
borrow $30,000 from a
bank to buy a car, at 6%/year nominal interest, for 6 years.
Problem 2) For the previous car loan, when you handed the bank
your check for the 24th
monthly payment, how much of that check was for interest, and
how much went toward
reducing what you owed on the car (principal reduction)?
Problem 3) How much total interest over the life of the loan...

Lease-versus-purchase decision Personal Finance
Problem Joanna Browne is considering either leasing or purchasing a
new Chrysler Sebring convertible that has a manufacturer's
suggested retail price (MSRP) of $33,000. The dealership offers a 3
-year lease that requires a capital payment of $3,250 ($2,925 down
payment +$325 security deposit) and monthly payments of
$508.Purchasing requires a
$2,660down payment, sales tax of 6.5% ($2,145 ), and 36
monthly payments of $902. Joanna estimates the value of the car
will be $17,000 at...

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