1a. Suppose that you wish to buy a new car that will cost you $25000. You must put $5000 down, and will finance the rest at 6% APR for the next 60 months, paid at the beginning of each month. What will your monthly payments be?

1b.

Instead of buying, the dealer offers to lease you a car worth $29500 for $698/mo. for 36 months with $6250 down, lease payments due at the beginning of the month. Assume that if you buy the car, the estimated value in 3 years will be $885. Should you lease or buy, and how much of an advantage does it provide you? (Assume that an APR of 5.5% is correct.)

a. LEASE, > $700

b. LEASE, < $700

c. BUY, < $700

d. BUY, > $700

e. Doesn't matter, the costs differ by less than $100