Which of the Following Statements Comparing Loans and Leases Is

question 31

Multiple Choice

Which of the following statements comparing loans and leases is FALSE?

• A)Because we are getting the entire asset when we purchase it with the loan,the loan payments are higher than the lease payments.
• B)In a perfect market,the cost of leasing and then purchasing the asset is equivalent to the cost of borrowing to purchase the asset.
• C)With a lease we are financing the entire cost of the asset;with a standard loan we are financing only the cost of the economic depreciation of the asset during its life.
• D)The amount of the lease payment will depend on the purchase price,the residual value,and the appropriate discount rate for the cash flows.

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Definitions:

Tax

A compulsory monetary fee or a different kind of charge levied on a taxpayer by a government entity to finance government expenses and various public costs.

Buyers

Individuals or entities that purchase goods or services for consumption, use, or investment.

Total Surplus

The combined benefit that all participants (consumers and producers) receive in a market, represented by the sum of consumer and producer surplus.

Market Equilibrium

A condition in a market where the quantity demanded equals the quantity supplied, leading to a stable price.