What is the total interest paid over the term of the lease?

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
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Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $1,500 purchase
option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years.
Lease Cash Effective Decrease in Outstanding
Payment Payment
Interest
Balance
Balance
40,860
31,960
24,978
17,577
9,731
??
0
1
2
3
4
5
6
8,900
8,900
8,900
8,900
8,900
1,500
Multiple Choice
$46,000
??
1,918
1,499
1,055
What is the total interest paid over the term of the lease?
$2.760
??
85
??
6,982
7,401
7,845
??
1,415
Transcribed Image Text:Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $1,500 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years. Lease Cash Effective Decrease in Outstanding Payment Payment Interest Balance Balance 40,860 31,960 24,978 17,577 9,731 ?? 0 1 2 3 4 5 6 8,900 8,900 8,900 8,900 8,900 1,500 Multiple Choice $46,000 ?? 1,918 1,499 1,055 What is the total interest paid over the term of the lease? $2.760 ?? 85 ?? 6,982 7,401 7,845 ?? 1,415
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