Lease Origination and Structure Flashcards
6 cards from real CLP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Lease Origination and Structure flashcards as text
Which of the following is a characteristic of a Fair Market Value (FMV) lease?
Answer: The lessee can buy the asset at its fair market value.
An FMV lease allows the lessee to purchase the asset at its fair market value at the end of the lease term, offering flexibility.
What does the term 'residual value' refer to in lease structuring?
Answer: The asset’s value at the end of the lease term.
Residual value is the estimated worth of the asset at the end of the lease, which affects monthly payment calculations.
In lease documentation, what is the primary purpose of the 'hell or high water' clause?
Answer: To guarantee uninterrupted payments by the lessee.
This clause ensures that the lessee must continue lease payments regardless of issues with the leased asset.
Which party typically retains ownership of the asset during the term of a true lease?
Answer: The lessor
In a true lease, the lessor retains ownership and the lessee has usage rights only for the lease duration.
What type of lease includes a guaranteed purchase price at the end of the term?
Answer: $1 buyout lease
A $1 buyout lease includes a fixed purchase price of $1, indicating transfer of ownership is expected.
Which of the following best defines a step lease?
Answer: A lease with payments that increase or decrease over time.
A step lease has periodic payment increases or decreases, making it suitable for companies with changing cash flows.