You would purchase the car for $25,000, which you would finance with a $3,000 down payment and
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You would purchase the car for $25,000, which you would finance with a $3,000 down payment and a $22,000 loan. The APR on the 3-year loan would be 3% per year compounded monthly. Your first payment on the loan would be at the end of period 1, or at time (month) 1. You will lease the car for three years, at which point it will be returned to you. The $500 lease payments would start at time 0 and continue until month 35 (36 lease payments in total). When the car is returned, you will sell it (at month 36) for an unknown amount S. Your nominal interest rate is 6% per year compounded monthly.
Find the breakeven resale price (s) of the car (in month 36) that you must achieve for this investment to be profitable.
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