Financial literacy math assingment

Question

A college student is trying to decide whether to buy or lease a motorcycle for getting to and from school. The cost of the motorcycle is $13,000, including tax.

a. Determine the monthly payment on a loan for the bike with a financing term of 36 months, an APR of 5.9%, compounded monthly

. b. Determine the monthly payment on a lease for 24 months, an APR of 4.1%, compounded monthly. The deprecation is 15% per year

. c. Based solely on the monthly payment, which option is the most affordable for this student.

Answer 1

A. $394.90

B. $169.53

Sonce there is 15% depreciation each year, the bike will be worth $9,100 after two years. 15% times 2 = 30% and 100% - 30% = 70%

70% of $13,000 = $9,100 = residual value

$13,00- $9,100 = $3,900 = loan value

C. The lease is more affordable based solely on monthly payments.