1. You sign the following lease agreement for a new car;

• $238 per month
• $2505 down payment
• $850 freight charge
• $275 security
• 15% taxes (on all of above except the security deposit)

1. How much cash will you need upon signing the agreement?
2. If the lease is for 4 years, calculate the total amount (including the start-up costs) you will have to pay over the lease agreement.Be sure to include 15% taxes on each monthly payment

1. This exercise will lead you through calculating the costs involved inpurchasing the same caras in question 1 above

• purchase price $17 300
• down payment of $2505
• balance to be financed at 1.9% interest over 3 years, compounded monthly
• freight and PDI $850
• air conditioning tax $100
• administration fee $85

1. Calculate the total cost of the car, including (15%) taxes
2. Calculate the total amount to be financed by subtracting the down payment from the total cost of the vehicle, and then using the compound interest formulaA=P(1 +i)n
3. Calculate how much the car will actually cost by adding the amount to be financed in b) to the down payment
4. Calculate the monthly payments using:

Fv=pmt(1+i)^n/i

1. whereFVis the amount from b),PMTis what you are solving,iis the interest rate per payment period, andnis the number of compounding periods in a year times the number of years.
2. Compare the total amounts required for the situations in questions 1 and 2
3. Which method costs more overall?
4. Which method has the highest monthly payments?
5. State the advantages and disadvantages of both?