Question: Calculating Annuity Values After deciding to buy a new car, you can either lease the car or purchase it on a three-year loan. The car

Calculating Annuity Values 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 528.000. The dealer has a special leasing arrangement where you pay $1 today and $380 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 8 percent APR. You believe you will be able to sell the car for $15,000 in three years. Should you buy or lease the car? What break-even res1e price in three years would make you indifferent between buying and leasing?

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To answer this question we should find the PV of both options and compare them Since we are purchasi... View full answer

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