a. A firm is considering purchasing or leasing a luxury automobile for the CEO. The vehicle is expected to last three years. You can buy the car for $65,000 up front, or you can lease it for $1,800 per month for 36 months. The firm can borrow at an interest rate of 8% APR with quarterly compounding. Should you purchase the system outright or pay $1,800 per month?

b. Consider a $30,000 car loan with 60 equal monthly payments, computed using a 6.75% APR with monthly compounding.

c. A client plans to send a child to college for four years starting 18 years from now. Having set aside money for tuition, she decides to plan for room and board also. She estimates these costs at $20,000 per year, payable at the beginning of each year, by the time her child goes to college. If she starts next year and makes 18 payments into a saving account paying 5 percent annually, what annual payment mush she make?

d. Lets assume Bank A offers you a 5% rate on the $100,000 loan. Meanwhile, Bank B offers to lend you the same amount of money, but at 4.75%. Over the course of a standard 30-year mortgage, the reduced interest rate could mean thousands of dollars in savings; and would, if all the other conditions of the two lenders loans were identical. However, Bank B requires $3,000 in upfront closing costs a reasonable figure for a new home purchase. Which is the better deal? If only there were a single metric we could use to compare loans with such varying characteristics.

e. Two years ago your firm took out a 30-year amortizing loan to purchase a small office building. The loan has a 4.8% APR with monthly payments of $2623.33. how much do you owe on the loan today? How much interest did the firm pay on the loan in the past year?