For the Following Lease,determine the Minimum Present Value Calculation for the Lessee

question 87

Multiple Choice

For the following lease,determine the minimum present value calculation for the lessee.
$$\begin{array} { | l | l | } \hline \text { Annual payment (due at end of year) } & \$ 23,104 \\\hline \text { Lease term } & 5 \\\hline \text { Incremental rate } & 10 \% \\\hline \text { Implicit rate (unknown to lessee) } & 8 \% \\\hline \text { Unguaranteed residual value } & \mathrm { NA } \\\hline \text { Guaranteed residual value } & 20,000 \\\hline\end{array}$$

• A)75,164
• B)78,636
• C)100,001
• D)105,859

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Definitions:

Maintenance Margin

The minimum amount of equity that must be maintained in a margin account to continue holding a position, set by a brokerage to prevent excessive borrowing based on volatile market values.

Margin Call

A margin call occurs when the value of an investor's margin account falls below the broker's required minimum level, prompting the investor to either deposit more funds or sell assets to cover the shortfall.

Margin Deposit

A deposit required by a broker from a client when they borrow from the broker to buy securities, serving as collateral for the loan.

Long Positions

Investing strategy where an investor buys a security with the expectation that it will increase in value.