Jared, an office administrator, is evaluating the following quotation that he received for the purchase of a printer for his office:

Lease Option: Make payments of $85 at the beginning of every month for 5 years. At the end of 5 years, make the final payment of $750.

Purchase Option: Make a payment of $4,750 immediately.

a. What is the present value of the lease option if money is worth 6.9% compounded semi-annually?

b. Which option would be economically better?

Purchase Option or Lease Option

c. What is the present value of the lease option if money is worth 8.7% compounded semi-annually?

d. Which option would be economically better?

Purchase Option or Lease Option