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The annual interest rate is 3.9 percent with monthly compounding, The current Value of the lease is 15940
What is the definition of monthly compound interest?
Compound interest is interest compounded on a loan or deposit's principal sum. Compound interest refers to the process of interest being added back to the principle sum so that interest can be earned during the next compounding period. Monthly Compound Interest = Principal is the formula to use.
PV = PMT (1-(1+i%))^-(n-1) / i% + PMT
So the calculation will be
PV = 299 (1-(1+.41%))^-59 / .41% + 299
PV= 15,940
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The current value of the lease is $15,940.
What is Lease?
Lease is an agreement in which one part agrees to give the land or the property on rent to the other party. There are two parties involved in the lease one being the landlord and other party is the Tenant.
According to the given question, the lease on the new car is $289 for 72 months then present value for is as follows :-
PV = PMT (1-(1+i%))^-(n-1) / i% + PMT
PV= payment per period.
i = annual rate of interest
n = time period.
Calculation for the present value of the lease is as follows:-
PV = 289 (1-(1+3.9%))^-72 / .41% + 299
PV= 15,940
Thus the present value of lease is $15,940
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