Question: Suppose the purchase price of a bulldozer is $90,000, its residual valu in four years is certain to be $15,000, and there is no risk

Suppose the purchase price of a bulldozer is $90,000, its residual valu in four years is certain to be $15,000, and there is no risk that the lessee will default on the lease. Assume the capital markets are perfect and the risk-free interest rate is 6% APR with monthly compounding. Suppose the instead of leasing the bulldozer, the company is considering purchasing a bulldozer outright by borrowing the purchase price using a four year annuity loan.

The monthly loan payments for a four year loan to purchase the bulldozer are closest to:

a. $1,825

b. $1,870

c. $1,750

d. $2,115

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