A local dealer is advertising a 24-month lease of a sport utility vehicle for $520 payable at the beginning of each month. The lease requires a $2,500 down payment plus a $500 refundable security deposit. As an alternative, the company offers a 24-month lease with a single up-front payment of $12,780 plus a $500 refundable security deposit. The security deposit will be refunded at the end of the 24-month lease. Assuming you have access to a deposit account that pays an interest rate of 6% compounded monthly, which lease is more favorable?
A local dealer is advertising a 24-month lease of a sport utility vehicle for $520 payable at the beginning of each month. The lease requires a $2,500 down payment plus a $500 refundable security deposit. As an alternative, the company offers a 24-month lease with a single up-front payment of $12,780 plus a $500 refundable security deposit. The security deposit will be refunded at the end of the 24-month lease. Assuming you have access to a deposit account that pays an interest rate of 6% compounded monthly, which lease is more favorable?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A local dealer is advertising a 24-month lease of a sport utility vehicle for $520 payable at the beginning of each month. The lease requires a $2,500 down payment plus a $500 refundable security deposit. As an alternative, the company offers a 24-month lease with a single up-front payment of $12,780 plus a $500 refundable security deposit. The security deposit will be refunded at the end of the 24-month lease. Assuming you have access to a deposit account that pays an interest rate of 6% compounded monthly, which lease is more favorable?
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