Question

Jennifer is leasing a car from a local auto retailer. The terms of the lease include a 9℅ interest rate for 36 months with a residual value of 57℅. The MSRP for the car Jennifer is leasing is $17,500. What will Jennifer's monthly lease payment be? a. $93.84 b. $99.75 c. $209.03 d. $312.06

Answer 1

d

Explanation:

on edge

Answer 2

The correct answer is D. $312.06

Explanation:

We are given that :

MSRP = $17500 , time = 36 months , interest rate = 9% , residual value = 57%

Exact residual value = 57% of 17,500 = $9975

Also, we know Money factor = rate ÷ 2400

⇒ money factor = 0.00375

Step 1 : To calculate monthly depreciation by using the formula :

`Monthly\thinspace Depreciation=(MSRP - Residual\thinspace Value)/(No.\thinspace of\thinspace Months) \\\\Monthly\thinspace Depreciation=(17500-9975)/(36)\approx \$209.03`

Step 2 : To calculate monthly financial charge by using the formula :

`\text{Monthly financial charge}=(MSRP+Residual\thinspace Value)\cdot money\thinspace factor\\\\\text{Monthly financial charge}=(17500+9975)\cdot0.00375\approx \$103.03125`

Step 3 : To calculate lease amount by using the formula :

`\text{Lease payment}= Depreciation + Financial charge\\\\Lease\thinspace payment =209.03+103.03125 \approx \$312.06`

So, the approximate lease payment is $312.06