CLP Lease Origination and Structure

Question 1

Which of the following is a characteristic of a Fair Market Value (FMV) lease?

Accepted Answer

The lessee can buy the asset at its fair market value.

Answer

An FMV lease allows the lessee to purchase the asset at its fair market value at the end of the lease term, offering flexibility.

Question 2

What does the term 'residual value' refer to in lease structuring?

Accepted Answer

The asset’s value at the end of the lease term.

Answer

Residual value is the estimated worth of the asset at the end of the lease, which affects monthly payment calculations.

Question 3

In lease documentation, what is the primary purpose of the 'hell or high water' clause?

Accepted Answer

To guarantee uninterrupted payments by the lessee.

Answer

This clause ensures that the lessee must continue lease payments regardless of issues with the leased asset.

Question 4

Which party typically retains ownership of the asset during the term of a true lease?

Accepted Answer

The lessor

Answer

In a true lease, the lessor retains ownership and the lessee has usage rights only for the lease duration.

Question 5

What type of lease includes a guaranteed purchase price at the end of the term?

Accepted Answer

$1 buyout lease

Answer

A $1 buyout lease includes a fixed purchase price of $1, indicating transfer of ownership is expected.

(CLP) Certified Leasing Professional Practice Test