Lease payment in the standard lease

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Reference no: EM13770158

A local car dealer is advertising a standard 24-month lease of $1,150 per month for its sports car. The standard lease requires a down payment of $4,500, plus a $1,000 refundable initial deposit now. The first lease payment is due at the end of month 1. In addition, the company offers a 24-month lease plan that has a single up-front payment of $30,500, plus a refundable initial deposit of $1,000. Under both options, the initial deposit will be refunded at the end of month 24. Assume an interest rate of 6% per year compounded monthly. With present-worth criterion, which option is preferred? (Answers: PW for the Standard Lease = -$30,560, PW for the Up-front Payment Lease = -$30,613, Select the Standard Lease.)

Note that the first lease payment in the Standard Lease is defined as occurring at the end of the first month.

Reference no: EM13770158

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