Using the following information, what is the cost to lease a car? • security deposit $320 • monthly lease payment $320 per month for a five− year lease • opportunity cost of security deposit $320 × loan period (in years) × 2% interest • end-of-lease charges $520
a. $19,200.00
b. $19,784.00
c. $19,752.00
d. $20,072.00
e. $20,272.00

The answer is option (D) $20,072.00

Explanation:

The total cost to lease a car will involve all associated costs of leasing the car. This can be expressed as;

Total lease cost=security deposit+monthly lease payment+opportunity cost+end-of-lease charges

where;

security deposit=$320

monthly lease payment=$320

total lease payment=320×12×5=$19,200

opportunity cost=320×5×0.02=$32

end-of-lease charges=$520

replacing;

Total lease cost=(320+19,200+32+520)=$20,072.00

Cost to lease a car=$20,072.00