Use the information for the question(s) below.
Suppose the purchase price of a bulldozer is $90,000, its residual value in four years is certain to be $15,000, and there is no risk that the lessee will default on the lease. Assume that capital markets are perfect and the risk-free interest rate is 6% APR with monthly compounding.
-Suppose that the bulldozer can be leased with a $1.00-out lease. The lease payments will be closest to ________.
A) 2,114
B) 1,825
C) 2,030
D) 2,103

Question

Quizplus · Accepted Answer

D) Set calculator to BEG mode (Annuity Due mode)
PV = 90,000
FV= −1
N = 48 (4 years × 12 months/year)
I = .5 (6%/12 months)
Compute PMT = $2,103.12

Use the Information for the Question(s) Below