Your car dealer is willing to lease you a new car for $359 a month for 48 months
ID: 2631021 • Letter: Y
Question
Your car dealer is willing to lease you a new car for $359 a month for 48 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 4.6 percent, what is the current value of the lease?
Your car dealer is willing to lease you a new car for $359 a month for 48 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 4.6 percent, what is the current value of the lease?
Explanation / Answer
This is Annuity Due problem.
Annuity Due PVA = PMT + PMT [(1+r)n-1 - 1] / [r (1+r)n-1]
PMT = 359
n = 48
r = 4.6 % / 12 = 0.38333% = 0.0038333
PVA =359 + 359 * [(1+ 0.0038333)47 - 1] / [0.0038333 (1+ 0.0038333)47] }
PVA = 15,772.40
Current value of lease = $15,772.40