Foundations of Mathematics 110

Week 12 Assignment: Financial Basics & Purchasing Options

You may use formulas or the TVM Solver for calculations. Round all answers for financial values to the nearest hundredth. Please note that an incorrect answer with no work shown will receive a mark of zero, so show all work. If using a calculator or the online TVM Solver, include a table showing your calculator input (N, I, PV, PMT, FV, P/Y, C/Y, as applicable).

Buy or Lease?

PART B: Buy or Lease? (24 marks) Here's the scenario: You need a car. You have $2100.00 in savings, and you just won $2500.00 on a scratch-and-win ticket! You qualify to either buy or lease a car, for a term of five years. You've gathered the following information (NOTE: We are not including any licensing fee here, which is extra, regardless of which option is chosen): To borrow and buy the car; financing option The purchase price of the car is $17,445.00. Delivery/destination and dealer fees total $2,449,00. The sales tax rate is 15%. The interest rate for financing the car varies depending on the term and is lower for shorter terms. You are hoping to pay it down in five years, so for a 60 -month term, the rate is 4.49%. With no down payment, the monthly payment (tax included) is \$426.41. With a down payment of $4000.00, the monthly payment (tax included) is $351.86. With normal driving, the car will be worth $8296.85 after five years. Initial amount due at signing: Only the down payment (if any). To lease the car The purchase price is $17,445,00. Delivery/destination and dealer fees total $2,449.00. The sales tax rate is 15%. The interest rate for leasing the car is 7.49%. The monthly lease payment, including the sales tax, is $324.70. The residual value of the vehicle at the end of the lease term is $8,296.85. Initial amount due at signing: First monthly payment. 1. Based on the information above, calculate the following and show all work. To finance/purchase with no down payment: (7 marks) a) Initial amount due at signing. b) Total of all monthly payments + initial amount (i.e., total cost to purchase). c) Based on your answer for part b) and the purchase price and other fees, how much is actually paid in interest? d) Total sales tax paid