Problem
Your lease calls for payments of $550 at the end of each month for the next 12 months. Now your landlord offers you a new 1-year lease that calls for zero rent for the first 3 months, then rental payments of $700 at the end of each month for the next 9 months. You keep your money in a bank time deposit that pays a nominal annual rate of 12 percent. By what amount would your net worth change if you accept the new lease? (Hint: Your return per month is 12%/12 = 1%.)