Which of the Following Is the Best Definition of an Operating

question 113

Multiple Choice

Which of the following is the best definition of an operating lease?

• A) A shorter-term lease where the lessor is responsible for insurance, taxes, and upkeep.
• B) A financial lease in which the lessee sells an asset to the lessor and then leases it back.
• C) A financial lease in which the lessor is the owner for tax purposes. Also called a true lease or a tax lease.
• D) A leveraged lease is a tax-oriented lease involving three parties: a lessee, a lessor, and a lender.
• E) A longer-term, fully amortized lease under which the lessee is responsible for upkeep. Usually not cancellable with-out penalty.

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Definitions:

Uncertainty

The state of having limited knowledge where it is impossible to exactly describe the existing state, a future outcome, or more than one possible outcome.

Negatively Correlated

A relationship between two variables in which one variable increases as the other decreases.

Portfolio Risk

The degree of uncertainty of returns on a portfolio due to the possibility of changes in the values of the holdings.

Market Risk Premium

The difference between the expected return on a market portfolio and the risk-free rate.