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Car Question: Assume you can find a 60-month lease, with the first payment due today. On the 60th payment, the dealer asks you to pay
Car Question: Assume you can find a 60-month lease, with the first payment due today. On the 60th payment, the dealer asks you to pay your last lease payment, and then to either return the car or pay $10,000 to own it. The present value of the lease is the value of the car net of the present value of the $10,000 end payment. If you are willing to pay $200 a month for the lease, what is the value of the car you can lease based on the $10,000 end payment? The interest rate is 6%.
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