Final answer:
To find the nominal quarterly interest rate for the lease, we use the present value of an annuity due formula with known values for present value ($21,500) and payment per period ($850) and solve for the interest rate per period. This usually requires a financial calculator or numerical methods.
Step-by-step explanation:
The student has asked what the nominal interest rate compounded quarterly is for a 7-year lease with a value of $21,500, given that the payments of $850 are made at the beginning of every quarter. To solve this, we use the present value of an annuity due formula, because the payments are made at the beginning of each period. The formula for the present value of an annuity due is PV = PMT * ((1 - (1 + r)^(-n)) / r) * (1+r), where PV is the present value, PMT is the payment per period, r is the interest rate per period, and n is the total number of payments. The lease term is 7 years and payments are made quarterly, thus there are 4 payments per year, leading to 28 total payments (7 * 4). The present value is given as $21,500, and the payment per period is $850.
To find the nominal quarterly interest rate, we need to set up the equation with the given values and solve for r. This would typically be done using financial calculators or numerical methods such as iteration or root-finding algorithms since there is no algebraic solution for r in this annuity due formula.