Question: Certainly! Here s the text excerpt from the image: Steele Subaru offers a special deal on leasing for Subaru Crosstreks. With a lease, the purchaser

Certainly! Heres the text excerpt from the image:
Steele Subaru offers a special deal on leasing for Subaru Crosstreks. With a lease, the purchaser has the option of buying the vehicle at the end of the lease. For example, suppose a $36,775 vehicle could be leased with a certain monthly payment for 36 months, and then the customer has the option to buy it for $18,389.80(this is the residual value). The monthly payment is related to both the purchase price as well as the residual value, and the purchase price is set at the time when the vehicle is leased. Now Steele Subaru needs to decide on their leasing strategy (15 marks).
(a) At 6.99% interest compounded monthly, what should Steele Subaru charge as the lease payment to ensure that they recover their expenses (assuming the customer buys the car at the end of the lease)? Lease payments are made at the start of each month.
(b). To encourage customers to lease vehicles, Steele Subaru may consider reducing the lease payments down to $599.99, by using higher residual value in the calculation. What residual value is used in the calculation for the lease payment of $599.99?

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