Question

Questions and problems: 9) You are trying to buy a car and your favorite car dealer is offering you a great car lease deal. The car lease is based on 40% of the car price to be paid in 36 months. The residual, or the other 60%, will be paid through a car loan starting on the 37th month. How much should you pay per month during the first 36 months if the car's sticker price was $35,000.00 and the lease interest rate is 3.50% (compound monthly)? Show your work.

please show calculation.

Answer 1

r(PV) P= 1-(1+r)-n PV = Present Value r=rate per period n=number of periods Monthly payment during first 36 months $14,000 ($35,000 x 40% is payable during first 36 months) 0.2917% [3.50% / 12 --> Annual interest rate is converted into monthly interest rate] 36 $410.23 {0.2917% x $14000 / (1 - (1+0.2917%)^(-36)]} Alternatively, Monthly Interest rate, RATE # of monthly payments of debt, NPER Loan amount, PV Balance in loan at the end, FV Monthly installment type, TYPE Monthly payment during first 36 months 0.2917% [3.50% / 12 --> Annual interest rate is converted into monthly interest rate] 36 $14,000 ($35,000 x 40% is payable during first 36 months] $0 [As loan amount shall be paid off over loan's tenure] 0 = 0 if installments paid at the end of each month; 1 if installments paid at the beginning of each month $410.23 [Ref: NOTE] NOTE: А B Monthly payment during first 36 months is calculated using EXCEL FUNCTION PMT(rate,nper,pv,fv, type) where rate=0.2917%; nper=36; pv=-14000; fv=0; type=0; Here, pv is negative as it denotes cash inflow; type=0 as installments are paid at the end of each month only. C D E F G H I J K L 1 Monthly Interest rate, RATE =3.5%/12 (3.50% / 12 --> Annual interest rate is converted into monthly interest rate) 2 # of monthly payments of debt, NPER 36 3 Loan amount, PV =35000*40% ($35,000 x 40% is payable during first 36 months) 4 Balance in loan at the end, FV $0 [As loan amount shall be paid off over loan's tenure] 5 Monthly installment type, TYPE 0 = 0 if installments paid at the end of each month; 1 if installments paid at the beginning of each month 6 Monthly payment during first 36 months =PMT(B1,B2,-B3,B4,B5) [Ref: NOTE] 7