Problem:
You decide to lease a new BMW car. The vehicle costs $35,000 new and you're required to pay all taxes and an additional $5000 at the beginning of the lease. The lease payments are $600 per month for three years and you know the lease company charges interest at 6% compounded monthly.
Required:
Question 1: What is the residual value of the car after 3 years?
Question 2: How much interest do you pay over the life of the lease?
Question 3: How much principal do you pay in the 3rd year of the lease?
Note: Provide support for your rationale.