In the Graph Below, Without Capital Movements Between Countries I

question 14

Multiple Choice

In the graph below, without capital movements between countries I and II, the capital Stock in country I is 0K₁ and the capital stock in country II is K₁0'. The return to capital In country I is thus __________ and the return to capital in country II is __________.

• A) 0r₁; 0'r'₁
• B) 0r₃; 0'r'₁
• C) 0r₁; 0'r'₃
• D) 0r₂; 0'r'₃

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Definitions:

Capitalized Lease

A lease arrangement that is recorded as an asset on the lessee's balance sheet, indicating that the lessee assumes some of the risks and benefits of ownership.

Fair Market Value

The price at which an asset would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Minimum Lease Payments

Minimum lease payments are the lowest amount that a lessee is obligated to pay over the lease term, including fixed payments, variable rent, guarantees, and residual value assurances.

Incremental Borrowing Rate

The interest rate a company would have to pay if it borrows funds on the day of the lease transaction, used in lease accounting.