Problem 4 (calculate interest rate with annuity+ a single sum) Refer to Example 7.12, even though it's not exactly the same. Ben wants a new car. The car's price is $70,000. Instead of paying $70,000 now to get the car, Ben went with a 36-month lease. The dealer offered the following lease term. The lease is 36 months. The monthly payment is $1,000. The car is to be returned to the dealer at the end of the lease term. The dealer estimated that when the car is returned, its residual value will be $40,000. Question: what monthly interest rate is the dealer effectively charging Ben on this lease? Hint: The dealer can get a $70,000 payment today by selling the car. The dealer is also willing to get 36 $1,000 payments, and the car returned with a value of $40,000 after 36 months. These two transactions are equivalent to the dealer. So, we are effectively asking what's the interest rate that sets the present value of 36 $1000 monthly payment + a $40,000 lump sum payment in the end to $70,000.

Problem 4 (calculate interest rate with annuity + a single sum) Refer to Example 7.12, even though it's not exactly the same. Ben wants a new car. The car's price is $70,000. Instead of paying $70,000 now to get the car, Ben went with a 36 -month lease. The dealer offered the following lease term. The lease is 36 months. The monthly payment is $1,000. The car is to be returned to the dealer at the end of the lease term. The dealer estimated that when the car is returned, its residual value will be $40,000. Question: what monthly interest rate is the dealer effectively charging Ben on this lease? Hint: The dealer can get a $70,000 payment today by selling the car. The dealer is also willing to get 36 $1,000 payments, and thecar returned with a value of $40,000 after 36 months. These tyo transactions are equivalent to the dealer. So, we are effectively asking what's the interest rate that sets the present value of 36$1000 monthly payment + a $40,000 lump sum payment in the end to $70,000