A Lease Option Is a Clause That Grants an Option

question 15

Multiple Choice

A lease option is a clause that grants an option holder the right, but not the obligation, to renew the lease, cancel the agreement, relocate within a property, or even expand to adjacent space. The existence of these options in a leasing agreement:

• A) reduces the expected present value of lease cash flows to the owner
• B) increases the expected present value of lease cash flows to the owner
• C) does not impact the expected present value of lease cash flows to the owner
• D) causes the expected present value of lease cash flows to equal zero

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Definitions:

Recession

A short-term economic slump characterized by a reduction in business and industrial activities, usually signified by a GDP decrease over two back-to-back quarters.

Real GDP

Gross Domestic Product adjusted for inflation, providing a more accurate representation of an economy's size and how it's growing over time.

Business Quarters

Divisions of a fiscal year into four three-month periods, used by companies to report financial results and forecast future performance.

Unemployment Rate

The quantity of jobless individuals in the labor force who are vigorously searching for employment.