CIPS Exam L4M3 Topic 8 Question 28 Discussion

Actual exam question for CIPS's L4M3 exam

Question #: 28
Topic #: 8

[All L4M3 Questions]

Which of the following statements is FALSE on contracts for the leasing of assets?

AThe party responsible for maintenance, insurance and taxes is subject to negotiation

BIn lease agreement, the possession and right of use of an asset are transferred to the lessee

CThe ownership of leased asset is transferred to the lessee at the end of the period

DThe lessee may bear some risks of ownership, such as the liability to insure the asset

Show Suggested Answer

Suggested Answer: C

A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. Some characteristics of Leases are:

- The right to use the lessor's asset is granted in exchange for a fee called the lease payment.

- The lease payments are usually paid in installments.

- Leases may be long- or short-term.

- At its inception a lease agreement constitutes a mutually unperformed contract

Though the ownership of the asset is not transferred to the lessee, some responsibilities and risks do. The lessor and lessee may negotiate on who is responsible on maintenance, insurance, etc.

LO 1, AC 1.3

by Rory at Feb 12, 2024, 10:09 AM

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6 months ago

I think the answer is C

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