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Liz was offered two options for a car she was purchasing: Lease option: Pay lease amounts of $350 at the beginning of every month for

Liz was offered two options for a car she was purchasing:

  • Lease option: Pay lease amounts of $350 at the beginning of every month for 5 years. At the the end of 5 years, purchase the car for $13,000.
  • Buy option: Purchase the car immediately for $28,500.

The money is worth 7.70% compounded monthly.

a. What is the Discounted Cash Flow (DCF) for the lease option?

Round to the nearest cent

b. Which is the better option?

Lease Option

Buy Option

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