What is the effective interest rate on a lease for a $170,000 truck with $0 down, $4,000 monthly payment over 5 years, and $1 buy-out option at the end?

To calculate the effective interest rate (EIR) on a lease, we need to treat this as a financing problem where the truck's price is treated as the principal, the monthly payments are treated as regular payments, and we compute the rate based on these values.

Here are the steps we'll follow:

1. **Principal (P):** The cost of the truck is $170,000.
2. **Monthly Payment (PM

Learn how to calculate the effective interest rate (EIR) on a $170,000 truck lease with $4,000 monthly payments over 5 years and a $1 buy-out option. This detailed explanation covers the time value of money, present value of annuity formula, and compound interest calculations. Suitable for finance students and advanced math learners.

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