After deciding to get a new car, you can either lease the car or purchase it with a two-year loan. The car you wish to buy costs $30,500. The dealer has a special leasing arrangement where you pay $90 today and $490 per month for the next two years. If you purchase the car, you will pay it off in monthly payments over the next two years at an APRof 7percent, compounded monthly. You believe that you will be able to sell the car for $18,500 in two years.

1. What is the cost today of purchasing the car?
2. What is the cost today of leasing the car?
3. What break-even resale price in two years would make you indifferent between buying and leasing?