A pension fund purchased an office block three months ago. A company has agreed to occupy the office block nine months from now.The lease agreement states that the company will rent the office block for 20 years. It is further agreed that rents will be paid half-yearly in advance and will be increased every two years at the rate of 2% per annum compound. The initial rent has been set at$60,000 per annum with the first rental payment due immediately on the date of occupation.As at the date of purchase of the office block, which of the following is the total present value of the rental income to the pension fundusing a force of interest of 6% per annum?O $707,962.87O $717,584.37$727,918.47$737,811.17O $745,953.06$754,910.54$763,502.94$773,078.44$782,806.52$793,958.88$805,149.71$816,661.56

Present value Present value (PV) of a future value (FV) is calculated using periodic interest rate…

Answered: A pension fund purchased an office…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Yankee Construction agreed to lease payments of $762.79 on construction equipment to be made at the end of each month for six years. Financing is at 15% compounded monthly. a) What is the value of the original lease contract? b) If, due to delays, the first eight payments were deferred, how much money would be needed after nine months to bring the lease payments up to date? c) How much money would be required to pay off the lease after nine months?
On January 1, Lessee Company leases equipment with a useful life of 5 years for a 6-year lease term. Payments of $88,000 are due at the beginning of each year. The incremental borrowing rate is 4%. The present value of the payments is $407,440. Which of the following is true? Interest expense at the end of the first year is $407,440 x .04 Amortization expense at the end of the first year is $407,440 divided by 6. Lease expense at the end of the first year is $88,000. Interest expense at the end of the first year is $319,440 x .04
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A 1,000-square-foot office space is leased at $15.00 per square foot during the first year with $2.00 step-up provisions each of the following years. The lease is gross with an expense stop set at $6.65 per square foot, and yearly expenses per square foot are as follows: $6.00, $6.65, and $7.05. The lease provides for two months of free rent at the end of the lease term. If the lease term is three years and the discount rate is 10 percent, what is the effective rent per square foot?
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Sheridan Company enters into a lease agreement with Sunland Inc. to lease office space for a term of 72 months. Lease payments during the first year are $6,800 per month. Each year thereafter, the lease payments increase by an amount equivalent to the percentage increase in the Consumer Price Index (CPI). For example, if the CPI increases 2% in the second year, the monthly payment increases to $6,936. In the second year, the CPI increases by 3%. What are the lease payment amounts used to record this lease in the second year? Lease payment $ 84,048
Gadubhai
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