You are thinking about leasing a car. The purchase price of the car is $35,000.

The residual value (the amount you could pay to keep the car at the end of the lease) is $15,000 at the end of 36 months. Assume the first lease payment is due one month after you get the car. The interest rate implicit in the lease is 7% APR, compounded monthly. What will be your lease payments for a 36-month lease? (Note: Be careful not to round any intermediate steps less than six decimal places.)

Expert Solution

To calculate the monthly lease payment , we use PMT function in Excel as follows :

Monthly lease payment =PMT(Rate,Nper,PV,FV)

Where,

Rate = 7% / 12

Number of periods ( Nper ) = 36

Present value ( PV ) = - 35000

Future value ( FV ) = 15000

Now,

Monthly lease payment =PMT(7%/12,36,-35000,15000)

Monthly lease payment = $ 705.04

jeff jeffy answered 2 years ago

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