Whitby Honda advertised Honda Pilot for sale at $33 610. The same vehicle could also be leased for 5 years at $379 per month, based on $4310 down payment and a residual value of $10 711. What monthly compounded interest rate was built into the lease?

Question

Quizplus · Accepted Answer

To find the monthly compounded interest rate built into the lease, we need to calculate the interest rate that equates the present value of the lease payments and the residual value to the total cost of the vehicle minus the down payment. Using the formula for the present value of an annuity and the present value of a single sum, the interest rate that satisfies this equation is approximately 4.13%.

Whitby Honda Advertised Honda Pilot for Sale at $33 610