A Farmer Decides to Lease a New Combine for the Next

Multiple Choice

A farmer decides to lease a new combine for the next 5 years.The purchase price of the combine is $1.2 million,and the expected residual value at the end of the lease is $430,000.If there is no risk of default and the risk-free rate is 4% APR with monthly compounding,what is the monthly lease payment for a 5-year lease in a perfect capital market?

A) $15,562
B) $15,614
C) $15,237
D) $12,833
E) $14,874