2

Maria can purchase a new car for $25,000. Alternatively, in addition to a down payment of $1,200, Maria can make lease payments of $475 at the beginning of each month for three years to lease the car. The car has a residual value of $12,500. Assume that the cost of borrowing is 4.27% compounded monthly. a. Which option is economically better for Maria? Buy Now Lease b. In the lease option, what will be the buyback value of the vehicle at the end of two years? Round to nearest cent