The rate of return required by a lessor for the use and ultimate disposal of the asset is referred to as the:
A)implicit interest rate
B)guaranteed residual rate
C)incremental borrowing rate
D)none of the above

Question

Quizplus · Accepted Answer

The rate of return required by a lessor for the use and ultimate disposal of the asset is known as the implicit interest rate. This rate is not explicitly stated in the lease agreement, but it is an important part of determining the lease payments and overall cost of the lease. The guaranteed residual rate is the amount that the lessor guarantees the asset will be worth at the end of the lease term, while the incremental borrowing rate is the rate that lessees use to calculate the present value of lease payments when they do not know the implicit interest rate.

The Rate of Return Required by a Lessor for the Use