A fiNancial Lease

question 151

Multiple Choice

A financial lease:

• A) Is classified as a capital lease by accountants.
• B) Is only partially amortized.
• C) Requires the lessor to pay the taxes.
• D) Has payments which are insufficient to cover the entire cost of the asset.
• E) Is a short-term tax-oriented lease.

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Definitions:

Compounded Semiannually

A calculation method where interest is applied to the principal plus previously accumulated interest twice per year.

Face Value

The nominal or dollar value printed on a financial instrument such as a bond or stock certificate, representing the value the issuer promises to pay at maturity.

Investment Yield

The earnings generated and realized on an investment over a particular period of time, expressed as a percentage of the investment's cost.

Maturity Date

The final payment date of a loan or other financial instrument, at which point the principal (and all remaining interest) is due to be paid.