1. Suppose that you wish to buy a new car that will cost you $75000. If you must put $15000 down, and will finance the rest at 4% APR for the next 60 months, paid at the beginning of each month.

a)What will your monthly payments be?

b)Suppose that you find out that given your credit, you should have only been charged an EAR of 3%.How much did you overpay because of dealer financing?

c)Instead of buying, the dealer offers to lease you the car worth $75000 for $1123/mo. for 60 months with $10500 down, lease payments due at the beginning of the month. Assume that if you buy the car, the estimated value in 5 years will be $7500. Should you lease or buy, and how much of an advantage does it provide you? (Assume that an APR of 4% is correct.)

d)What if you are charged 3% EAR? Do you buy or lease? (Assume that the dealer is still offering the similar terms above and EAR is correct.)