Your car dealer is willing to lease you a new car for $245 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 6.5 percent,what is the current value of the lease?

Question

Quizplus · Accepted Answer

The current value of the lease is the present value of an annuity due. The formula for the present value of an annuity due is PV = PMT × [(1 - (1 + r)^-n) / r] × (1 + r), where PMT is the monthly payment, r is the monthly interest rate (annual rate divided by 12), and n is the number of payments. Using these values, the present value is calculated to be $10,386.99.

Your Car Dealer Is Willing to Lease You a New