Question

Reginald is about to lease an apartment for 18 months. The landlord wants him to make the lease payments at the start of the month. The monthly payments are ​$1,100 per month. The landlord says he will allow Reg to prepay the rent for the entire lease with a discount. The​ one-time payment due at the beginning of the lease is ​$18,984 What is the implied monthly discount rate for the​ rent? If Reg is earning ​0.3% on his savings​ monthly, should he pay by month or make the​ one-time payment?

Answer 1

Based on the monthly payments and the lease period, the implied monthly discount rate is 0.5%.

How can we find the implied monthly discount rate?

We can use the RATE function on spreadsheets.

NPER = 18 months

PMT = $1,100

PV = -$18,984

FV = 0

Type = 1 because payment is at the beginning of the month

The return would be 0.5%.

Reg should make the one time payment because he is earning less than the discount rate.

Find out more on implied discount rates at https://brainly.com/question/24130688.

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