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Dohyun Math IA

This internal assessment compares the financial implications of purchasing versus leasing a vehicle, specifically a $30,000 car over five years. The analysis incorporates mathematical concepts such as compound interest, depreciation, and differential calculus to evaluate the net financial cost of each option. The goal is to determine which financing method is more financially efficient while applying relevant IB Mathematics concepts to a real-world scenario.

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3 views2 pages

Dohyun Math IA

This internal assessment compares the financial implications of purchasing versus leasing a vehicle, specifically a $30,000 car over five years. The analysis incorporates mathematical concepts such as compound interest, depreciation, and differential calculus to evaluate the net financial cost of each option. The goal is to determine which financing method is more financially efficient while applying relevant IB Mathematics concepts to a real-world scenario.

Uploaded by

jamesbyen
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

IB Mathematics AA HL Internal Assessment

A Mathematical Comparison of Purchasing and Leasing a Vehicle

Dohyun Byen

Mr. Ben Sillitoe

As I am becoming an adult, I have started thinking more deeply about long-term


financial and economic decisions. One of the first major purchases that many young
adults consider is buying a car. Although the listed price of a vehicle looks
straightforward, the overall financial impact depends significantly on the method of
financing. Different payment structures influence how money accumulates over time, and
the true long-term cost is not immediately visible from monthly payments alone. For this
reason, mathematical analysis is necessary to evaluate which option leads to a more
rational and financially efficient outcome.

In this investigation, I will compare two common methods of acquiring a vehicle


which are purchasing a $30,000 car through a five-year loan and leasing the same
vehicle over an equivalent five-year period. The loan will be modeled using a fixed
annual interest rate of 6% compounded monthly allowing the use of compound interest
and annuity formulas to determine total payment. In addition, since vehicles lose value
overtime, depreciation will be incorporated into the model using a constant annual rate
of 12% represented by exponential decay function. To deepen the analysis, differential
calculus will be applied to determine the instantaneous rate of value loss at different
stages. By calculating the derivative of the depreciation function, I can compare the
speed of depreciation in the early years versus the end of the five-year period. A five-
year period is chosen to reflect common financing terms and ensure meaningful interest
and depreciation rate. The comparison will focus on net financial cost, defined as total
expenditure minus the vehicle’s remaining value after five years. By constructing cost
functions that represent total expenditure and remaining vehicle value over time, I will
analyze both options algebraically and graphically.

The purpose of this exploration is to determine which financing method


represents a more financially efficient decision over five years. This topic reflects my
personal interest in finance. Beyond my interest, it also allows me to apply concepts from
IB Mathematics AI HL, including compound interest, exponential modelling, financial
mathematics, and differential calculus, to a realistic economic situation.

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