Learning Objectives

# Problem 1 of 3

Emily wishes to obtain a new car with a total price of $18 752.

Option 1: Purchase the car now with a down payment of $4000 and a loan at 2% per annum compounded monthly and paid monthly for 3 years.

Option 2: Lease the car with no down payment and pay $325 per month for 3 years and then purchase the car outright at its lease-end value of $8000.

(a) What is the monthly payment for Option 1?

(b) What is the total paid in Option 2?

(c) Which option will cost Emily the least amount and by how much?

**Solution**

**A= P(1+i)^t**

--p= principal. amount to begin with.

--A= amount paid at the end.

--t= time in years

Option 1 a) =18 752(1+.02)^3

=18 752(1.02)^3

=$56821.15*$4000.00

=$19899.77+$4000.00

=$23899.77

option one montly pay=$19899.77/36

Option 2 b) 325*36=$11700.00+8000 *12*3=36*

- Option 2 will cost Emily the least amount. by: $23899.77-19700.00

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