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Hi,
Could you please explain question 31?
Why did the examiner use the 8% as discount factor for the lease?
The 8% is for the bank loan and not to discount the lease and borrow and buy option.Thanks.
But that is what we always do when making the decision as to whether to lease or to buy.
If they buy, then the question specifically says that they will use the bank loan to finance the purchase. The interest on the bank loan is 8% and so we discount at 8% in order to decide whether or not leasing is cheaper.
I suggest that you watch my free lectures on lease and buy. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
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