A farmer decides to lease a new combine for the next 5 years.The purchase price of the combine is $1.2 million,and the expected residual value at the end of the lease is $430,000.If there is no risk of default and the risk-free rate is 4% APR with monthly compounding,what is the monthly lease payment for a 5-year lease in a perfect capital market?

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The correct answer is A.The monthly lease payment can be calculated using the following formula:```Monthly lease payment = (Purchase price - Residual value) * (r / (1 - (1 + r)^(-n)))```where:* r is the monthly risk-free rate* n is the number of months in the leasePlugging in the given values, we get:```Monthly lease payment = (1,200,000 - 430,000) * (0.04 / (1 - (1 + 0.04)^(-60)))= $15,562```

A Farmer Decides to Lease a New Combine for the Next