Use the Information for the Question(s) Below

question 32

Multiple Choice

Use the information for the question(s) below.
Suppose the purchase price of a bulldozer is $90,000, its residual value in four years is certain to be $15,000, and there is no risk that the lessee will default on the lease. Assume that capital markets are perfect and the risk-free interest rate is 6% APR with monthly compounding.
-Suppose that instead of leasing the bulldozer, the company is considering purchasing a bulldozer outright by borrowing the purchase price using a four-year annuity loan. The monthly loan payments for a four year loan to purchase the Bulldozer are closest to ________.

• A) $2,115
• B) $1,825
• C) $1,870
• D) $1,750

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Definitions:

Court

A governmental institution authorized to settle disputes between parties, interpret laws, and administer justice in legal cases.

Professional

An individual with specialized skills and knowledge who adheres to the standards and ethics of a particular profession.

Negligence Action

A legal claim brought against someone who fails to take reasonable care, resulting in harm or damage to another person.

Reasonable Person

A legal standard used to determine how an average person would responsibly act in certain circumstances for the purpose of establishing negligence.