51.3
3. You're planning to lease a 4Runner. Assume your
lease payments are $434 per month. You're thinking that if you
like the 4Runner, then after 2 years of leasing it, you will
take-out a loan, and buy-out the lease. Assume that, in two
years, you will have to borrow $25,500 to buy-out the lease. Your
loan will be a 7-year loan (84 monthly payments). What will
your loan payment be? What is the present value today, of
all of your payments for the 4Runner (lease and loan payments)?
Assume a discount rate of 6.25%, compounded monthly. [HINT:
Set-up a cash flow timeline. Your first lease payment is one
month from today, your last lease payment Is 24 months from today
and your first loan payment is 25 months from today.]