1. Your company plans to purchase a new dump truck 8 % nominal annual for 48 months. Purchase price is $ 60,000 and you put $5K as a down payment. Interest is compounded weekly and you make monthly payments at the end of each month (first payment at end of first month) Answer the following questions:
What is your monthly interest rate ____________
What is your monthly payment ____________
What is your outstanding balance after your 24 th payment? ____________
How much principle do you pay on your 25 th payment? ____________
2. What if you instead choose to lease the truck (problem above) for 8% nominal annual for 48 months. Interest is compounded weekly and you make monthly payments. You don’t make a down payment but your Residual value at the end of your lease is $12,000. Assume payments are made at the beginning of the month. Answer the following questions:
What is your monthly payment?_______
If you can invest your money at 6% nominal annual compounded monthly, would you prefer leasing or purchasing this vehicle?_____________