Determine the interest rate for the lease

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Reference no: EM131806918

The following advertisement appeared in the Wall Street Journal on Thursday, February 9, 1995; There's nothing quite like the Seville SmartLease. Seville SLS $0 down, $599 a month/36 months. Terms are first month's lease payment of $599 plus $625 refundable security deposit and a consumer down payment of $0 for a total of $1224 due at lease signing. Monthly payment is based on a net capitalized cost of $39,264 for total monthly payments of $21,564. Payment examples based on a 1995 Seville SLS: $43,658 MSRP including destination charge. Tax, license, title fees, and insurance extra. Option to purchase at lease end for $27,854. Mileage charge of $0.15 per mile over 36,000 miles.

(a) Set up the cash flows.

(b) Determine the interest rate (nominal and effective) for the lease.

Reference no: EM131806918

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