Toronto Trucking has decided to lease a long-haul trailer for the next 5 years using a fixed price lease that allows them to buy the asset for $95,000.The purchase price of the trailer is $235,000,and the trailer has a residual value of $110,000 after 5 years.If the risk-free rate is a 3% APR with monthly compounding,what would be the monthly lease payment for a 5-year lease?

Question

Quizplus · Accepted Answer

The correct answer is A because the monthly lease payment for a 5-year lease is $2,746.25. This is calculated using the following formula:Monthly lease payment = (Purchase price - Residual value) * (r / (1 - (1 + r)^-n))where:r = risk-free raten = number of months in the lease termIn this case, the purchase price is $235,000, the residual value is $110,000, the risk-free rate is 3% APR, and the lease term is 5 years (60 months). Plugging these values into the formula, we get:Monthly lease payment = (235,000 - 110,000) * (0.03 / (1 - (1 + 0.03)^-60))= $2,746.25

Toronto Trucking Has Decided to Lease a Long-Haul Trailer for the Next