CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which of the following statements regarding a lessor's direct financing lease is generally true?
A. The present value of both the lease payments and any unguaranteed residual value is greater than the lessor's investment in the property.
B. The present value of both the lease payments and any unguaranteed residual value is equal to the lessor's investment in the property.
C. The present value of both the lease payments and any unguaranteed residual value is less than the lessor's investment in the property.
Explanation: The lessor usually calculates the periodic payments based upon the amount of the investment that will be recovered. The equation would indicate that the investment is equal to the present value of the payments plus the present value of the residual value (guaranteed or unguaranteed).

User Contributed Comments 5

User Comment
shasha guaranteed OR un-guranteed! both!
Gigem The required readings are excrutiatingly inadequate in describing when a lease should be classified as a direct financing vs capital vs sales type lease from the lessors viewpoint.
solnce Net or gross investment?
fooshnip could be way off base, but my take was B. represents no profit/properly valued - therefore it is a direct-financing lease. A. represents a profit, so sales-type lease. Not sure of C. which represents a loss, but would lean towards sales-type.
siggarusfigs What is guaranteed meaning here?
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