Question

What would be the total cost of leasing a vehicle for four (4) years that requires a security deposit of $1,000 (which would be withdrawn from your portfolio, which earns 9% per year), has monthly lease payments of $500, and has a mileage restriction of 20,000 with excess mileage resulting in a 10 cents per mile charge. Assume over the life of the lease you exceed the mileage limitations by a total of 8,000 miles.

A) $24,000
B) $24,360
C) $24,800
D) $25,160

Answer 1

The total cost of leasing a vehicle for four years, taking into account lease payments, a security deposit, and excess mileage charges, is $26,157.63.

Step-by-step explanation:

To calculate the total cost of leasing a vehicle for four years, we need to consider the monthly lease payments, the security deposit, and any excess mileage charges. The monthly lease payments are $500, so for four years, the total lease payments would be $500 x 12 months/year x 4 years = $24,000.

The security deposit of $1,000 is withdrawn from a portfolio earning 9% per year, so after four years, the investment would have grown to $1,000 x (1 + 0.09)^4 = $1,357.63. Finally, we need to account for the excess mileage charge.

With a mileage restriction of 20,000 miles per year, exceeding the limit by 8,000 miles over four years would result in a charge of 8,000 miles x $0.10/mile = $800. Adding up the lease payments, security deposit growth, and excess mileage charge, the total cost of leasing the vehicle for four years would be $24,000 + $1,357.63 + $800 = $26,157.63.