杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ SchweserPrintableAnswersBook6Exam2PM TestID#:1365276 Question1#45212 Youranswer:Bwascorrect! StandardI(A)KnowledgeoftheLaw.ThisStandardrequirescandidatesandmembers complywithallapplicablerulesandregulations,includingtheCFAStandardsofPractice. Further,StandardI(A)requiresthatmembersandcandidatesmustnotknowinglyparticipate inviolationsofapplicablelawsandStandards.Eventhoughlocallawpermitspurchasing sharesforpersonalaccountsbeforepurchasingIPOsharesforclientaccounts,Standard VI(B)PriorityofTransactionsdoesnot.TheanalystknowinglyviolatedtheCodeand StandardsandthusviolatedStandardI(A).Sincetheanalystwasunawareofthedeceitinthe valuationoftheIPOstock(aviolationofStandardI(D)Misconduct),herparticipationin publishingtheresearchdidnotconstituteaviolation. Question2#45213 Youranswer:Bwascorrect! BurkeandtheanalystviolatedStandardV(B)CommunicationwithClientsandProspective Clientsbynotidentifyingexpectedvolatilityasanimportantfactorinthemodel,andStandard V(A)DiligenceandReasonableBasisbynothavingareasonablebasisforthe recommendation,sincevolatilityhadchanged.TheanalystalsoviolatedStandardI(C) Misrepresentationwhichstatesthatmembersandcandidatesmustnotguaranteeclientsa specificreturnoninvestments.Theanalyst抯reportessentiallyguaranteesthatthereturn earnedinthepreviousyearwillbeearnedintheupcomingyear. Question3#45214 Youranswer:Cwascorrect! StandardI(C)Misrepresentation.Allsourcesusedinananalyst抯reportshouldbe referencedastothesource,author,andpublisher梩heonlyexceptionbeingfactual informationpublishedbyrecognizedfinancialandstatisticalreportingservices. Question4#45215 Youranswer:Cwascorrect! 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ StandardIII(C)Suitability.Membersandcandidatesshouldcarefullyconsidertheneeds, circumstances,andobjectivesofclientsbeforetakinginvestmentaction.However,some membersandcandidatesaremerelyexecutingspecificinstructionsforretailclients.Inthis case,sinceWellsbelievesthetradeisunsuitable,Wellsshouldconfirmthattheclientis awaretheactionisunsuitablebeforeexecutingthetradeorrefrainfrommakingthetrade. Question5#45216 Youranswer:Awascorrect! StandardI(C)Misrepresentation.JameshasactedinappropriatelyinaskingJonesto plagiarizethereportandmayhaveviolatedseveralStandards,includingStandardIV(C) ResponsibilitiesofSupervisors.However,hehasnotviolatedtheprohibitionagainst plagiarisminStandardI(C).Jones,ontheotherhand,evenifactingontherequestofher supervisor,willviolateStandardI(C)Misrepresentation.Makingminorchangestoareport doesnotmakeityourown. Question6#45217 Youranswer:Awascorrect! AccordingtoStandardII(B)MarketManipulation,membersandcandidatesshouldnot engageinanypracticethatwouldartificiallyinflatetradingvolumeordistortprices.However, thisStandarddoesnotprohibittransactionsdonefortaxpurposes.Inthiscase,therewasno intenttomisleadmarketparticipantsastothestockpriceofSafetyAirlines,andthetrades wereundertakentotakeadvantageofalegitimatetaxstrategy.Thustherehasbeenno violationofStandardII(B)oranyotherStandard. Question7#45218 Youranswer:Dwascorrect! StandardI(B)IndependenceandObjectivityallowsinvestorpaidresearchbutrequiresthat membersandcandidateslimitthetypeofcompensationtheyacceptforwritingaresearch reportsothatitisnotdependentontheconclusionsoftheresearchreport.Bestpracticeis foranalyststoonlyacceptaflatfeeforsuchcompanypaidresearchreports.Suchresearch shouldalsoincludecompletedisclosureofthenatureofthecompensationreceivedforwriting suchareportsothatinvestorswillnotbemisledastotherelationshipbetweentheanalyst andthecompany. 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Question8#45219 Youranswer:Dwascorrect! StandardV(C)RecordRetention.Intheabsenceofregulatoryrequirements,StandardV(C) recommendsmaintainingrecordssupportinginvestmentrecommendationsandactionsand recordsofinvestmentrelatedcommunicationswithclientsforatleastsevenyears.Here, thereisregulatoryguidanceandsevenyearsisarecommendation,notarequirement,inany case.Recordscanbemaintainedinelectronicorhardcopyformat. Question9#45220 Youranswer:Awascorrect! Totalfirmassetsmustincludeallaccountswhetherdiscretionaryornotandwhetherfee payingornot. Question10#45221 Youranswer:Bwascorrect! StandardIII(B)FairDealing.Changesfrom揃uy?to揝ell?shouldbedisseminated,ata minimum,toclientsthebrokerknowshavepurchasedandheldthesecuritybasedonthe earlierrecommendation,andtopersonsplacingorderscontrarytothefirm抯current recommendation. Question11#45222 Youranswer:Cwascorrect! StandardVI(B)PriorityofTransactions.Membersandcandidatesmustgivetransactionsfor clientsandemployerspriorityovertheirpersonaltransactions.Inthisinstance,Jamesdidnot adverselyaffecttheclient抯interestbecausetheclient抯tradeswereexecutedbefore Jamescopiedthem.Hehasnotactedfraudulentlyordeceitfully.Reasonablebasisappliesto investmentrecommendationsandactionstakenforclients. Question12#45223 Youranswer:Awascorrect! 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Thecircumstancesofthebankruptcydidnotinvolvefraudulentordeceitfulbusinessconduct, sothereforethereisnoviolationofStandardI(D)Misconduct.Hart抯bankruptcydoesnot compromisehisprofessionalreputationortheintegrityoftheCFAdesignation. Question13#45224 Youranswer:Cwascorrect! UndertheCodeandStandards,Marshallhasanobligationtodisclosethatshereceives specialcompensationbasedontheamountofclienttradingvolume.StandardVI(A) DisclosureofConflictsrequiresmemberstodisclosetoclientsandprospectsallmattersthat couldpotentiallyimpairthemember抯abilitytomakeinvestmentdecisionsthatare(andto giveinvestmentadvicethatis)objectiveandunbiased. Question14#45225 Youranswer:Bwascorrect! StandardVI(A)DisclosureofConflicts.Matlockmustdisclose(1)specialrelationships梔 irectorshipsandconsultancies,(2)investmentbanking,(3)underwritingandfinancial relationships,(4)brokerdealermarketmakingactivities,and(5)materialbeneficialownership. ThefactthatMatlock抯sonworksforKingCompanyisnotaconflictrequiringdisclosureto clientsandprospectssincehissonisnotamanagerofthefirm,inwhichcaseitcouldbe. Question15#45226 Youranswer:Dwascorrect! UnderStandardIII(E)PreservationofConfidentiality,membersandcandidatesshould maintaintheconfidentialityofinformationreceivedinthecourseoftheirprofessionalservice relatingtobothcurrentandformerclients.Inthecaseofillegalactivity,however,Reillymay havealegalobligationtoreporttheactivity.Ideally,heshouldconsultwithhisemployerfirst aboutwhatactionshemayberequiredtotake.Ofthechoicesgiven,seekingtheadviceof outsidecounselastowhetherhehassuchanobligationunderlocallawandwhetherthe activityisindeedillegalistheonepermittedundertheStandard. Question16#45227 Youranswer:Bwascorrect! 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ StandardII(A)MaterialNonpublicInformationrequiresthatmembersandcandidateswho possessmaterialnonpublicinformationnotactorcauseotherstoactontheinformation. Puttingthestockonarestrictedlist,refusingthetrade,orsharingtheinformationwithhis supervisor,areallpotentialviolationsofthisStandardsincetheyinvolveactingorcausing otherstoactonthenonpublicinformationhepossesses.DeanshouldseektohaveEast Streetmaketheinformationpublic.Ifpublicdisseminationisnotmade,heisnotallowedto actontheinformation.Refusingtomakethetradehewasinstructedtomakewouldbe揳 cting?ontheinformationinthiscase.Theobligationhereistotheintegrityoffinancial markets. Question17#45228 Youranswer:Cwascorrect! Afirmcanincludenoncompliantperformancedatafortheperiodjustpriortotheperiodof compliantperformancedata,aslongasnononcompliantdataforperiodsafterJanuary1, 2001isincluded,allnoncompliantdataareidentified,andthewaysinwhichthedataare noncompliantaredisclosed.Firmsmustsupplyalistofcompositesandcomposite descriptionsonlytoclientsandprospectsthatrequestit.Firmsmustaddoneyearof compliantperformanceinformationeachyearuntilatotaloftenyearsdataarereported. Question18#45229 Youranswer:Awascorrect! TheCFAInstitute抯GIPSrequirethat,toclaimcompliance,firmsmustpresentGIPS compliantperformanceinformationforaminimumoffiveyears,orsinceinceptionifin existencelessthanfiveyears. Question19#45230 Youranswer:Bwascorrect! Thisprobleminvolvesdeterminingthepresentvalueofanannuityfollowedbyfindingthe presentvalueofalumpsum.EnterPMT=10,000,N=10,andI/Y=14.ComputePV= 52,161.16.Thatisthepresentvalueofthe10yearannuity,4yearsfromtoday.Next,we needtodiscountthatbacktopresentfor4yearstofindtheamountoftheinvestmenttoday. EnterFV=52,161.16,N=4,I/Y=14,PMT=0.ComputePV=30,883.59. Question20#45231 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Youranswer:Bwascorrect! Thecumulativeabsolutefrequencyofthefourthintervalis80,whichisthesumofthe absolutefrequenciesfromthefirsttothefourthintervals. Question21#45232 Youranswer:Awascorrect! Inthissituation,thecoefficientofdetermination(R 2 )isthepercentageoftotalvariationinthe dependentvariable(companysales)explainedbythevariationintheindependentvariable (industrysales). totalvariation(SST)=unexplainedvariation(SSE)+explainedvariation(SSR) So,thecoefficientofdeterminationcanbeexpressedas: AnR 2 of0.25indicatesthatthevariationinindustrychipsalesexplains25%ofvariationin salesofTastyChips.Forasimpleregression(oneindependentvariable)thesquarerootof theR 2 isthecorrelationbetweenthevariables, Question22#45233 Youranswer:Awascorrect! Theaverageannualcompoundgrowthrateiscalculatedas: [(1+0.25)(1?0.25)(1+0.30)(1?0.30)] 0.25 ?1=0.9611?1=?.0389or?.89%. Aninitial$10,000investmentwouldbeworth10,000(1.25)(0.75)(1.3)(0.7)=$8,531. Question23#45234 Youranswer:Dwascorrect! 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Mean=120/10=12,median=10,andmode=10.Thedistributionisskewedtotheright,so themeanisgreaterthanthemedianandmode.Generally,forpositivelyskeweddistributions, themodeislessthanthemedian,whichislessthanthemean.Inthiscase,themodeand medianareequalbecausethenumberofobservationsissmall. Question24#45235 Youranswer:Cwascorrect! Thecoefficientofvariation,CV=standarddeviation/arithmeticmean,isacommonmeasure ofrelativedispersion(risk).CV W =0.4/0.5=0.80;CV X =0.7/0.9=0.78;CV Y =4.7/1.2=3.92; andCV Z =5.2/1.5=3.47.BecausealowerCVmeanslowerrelativerisk,SecurityXhasthe lowestrelativeriskandSecurityYhasthehighestrelativerisk. Question25#45236 Youranswer:Dwascorrect! TheSharpemeasureforaportfolioiscalculatedasthe(meanportfolioreturn?meanreturn ontheriskfreeasset)/portfoliostandarddeviation.TheSharpemeasuresforthefourmutual fundsare: Mutualfund1=(12?5)/15=0.47 Mutualfund2=(13?5)/18=0.44 Mutualfund3=(15?5)/20=0.50 Mutualfund4=(18?5)/24=0.54 Assumingthatinvestorspreferreturnanddislikerisk,theyshouldpreferportfolioswithlarge Sharperatiostothosewithsmallerratios.Thus,theinvestorshouldprefermutualfund4. Question26#45237 Youranswer:Bwascorrect! Subjectiveprobabilityisbasedonpersonaljudgment.Arandomvariableisaquantitywhose outcomesareuncertain. 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Ajointprobabilityisaprobabilitythattwoormoreeventshappenconcurrently.Anapriori probabilityisonebasedonlogicalanalysisratherthanonobservationorpersonaljudgment. Anempiricalprobabilityiscalculatedusinghistoricaldata.Aconditionalprobabilityisthe probabilityofoneeventhappeningontheconditionthatanothereventiscertaintooccur. Question27#45238 Youranswer:Bwascorrect! Thisprobleminvolvesthejointprobability,whichistheprobabilityofbotheventshappening. P(valueandpreviousportfoliomanager).[P(value)][P(previousportfoliomanager)]= (0.4)(0.7)=0.28 Question28#45239 Youranswer:Cwascorrect! Thisprobleminvolvestheadditionruleforprobabilities,whichistheprobabilitythatatleast oneoftwoeventswilloccur.P(valueorselectedbythepreviousportfoliomanager)=P(value) +P(previousportfoliomanager)?P(valueandpreviousportfoliomanager)=0.40+0.76 ?0.28=0.88or88%.Note:P(previousmanager)=(0.7)(0.4)+(0.8)(0.6)=0.76.Alternatively, theprobabilitythatagrowthstockwasselectedbythepreviousmanageris0.6×0.8=0.48. P(value)+P(growthandpreviousmanager)=0.40+0.48=0.88or88%. Question29#45240 Youranswer:Awascorrect! Thestandardnormaldistributionhasameanof0andastandarddeviationof1. Question30#45241 Youranswer:Bwascorrect! SelectedbythePrevious PortfolioManager SelectedbytheCurrent PortfolioManager Total Valuestocks 28(28%) 12(12%) 40 Growth stocks 48(48%) 12(12%) 60 Total 76 24 100 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ The95%confidenceintervalis10%?1.96(4%)orfrom2.16%to17.84%. Question31#45242 Youranswer:Awascorrect! Usingthestandardnormalprobabilitydistribution,, thechanceofgettingzeroorlessreturn(losingmoney)is1?0.9772=0.0228%or2.28%.An alternativeexplanation:theexpectedreturnis10%.Tolosemoneymeansthereturnmustfall belowzero.Zeroisabouttwostandarddeviationstotheleftofthemean.50%ofthetime,a returnwillbebelowthemean,and2.5%oftheobservationsarebelowtwostandard deviationsdown.About97.5%ofthetime,thereturnwillbeabovezero.Thus,onlyabouta 2.5%chanceexistsofhavingavaluebelowzero. Question32#45243 Youranswer:Cwascorrect! Accordingtothecentrallimittheorem,thesamplemeanforlargesamplesizeswillbe distributednormallyregardlessofthedistributionoftheunderlyingpopulation. Question33#45244 Youranswer:Dwascorrect! Thecrowdingouteffectreferstoareductioninprivateborrowingandspendingasaresultof higherinterestratesgeneratedbybudgetdeficitsthatarefinancedbyborrowingintheprivate loanablefundsmarket. Question34#45245 Youranswer:Awascorrect! Aggregatehoursmeasuresthetotalnumberofhoursworkedinayearbyallemployed people.Aggregatehourstakesaccountofboththelevelofemploymentandtheaverage workweek,makingitsuperiortoeitherofthosemeasuresasanindicatoroftotallabor performed.Totallaborcompensationisameasureofrealwageratesthatincludeswages, salaries,andemployerpaidbenefits. 杨帆13818157537CFA资料专卖 欢迎广大考友订购！ 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第6本解释！买本公司notes看的舒心，用的放心，祝您一次通过！ Question35#45246 Youranswer:Bwascorrect! whereristhenominalriskfreerate.Hence,Thenominal rateintheU.S.is5%=2+3.Theresultisthat Using(1.02)(1.03)?1=0.0506fortheU.S.nominal rateproducesaresultof4.12%. Question36#45247 Youranswer:Cwascorrect! OpenmarketoperationsaretheU.S.FederalReserve抯mostoftenusedtoolforchanging themoneysupply. Question37#45248 Youranswer:Dwascorrect! Thedemandforlaborisaderiveddemand.Whenthedemandforthefinalgoodorservice increases,thepriceofthatfinalgoodorserviceincreases.Thatincreaseinpricewillleadto thefirmemployingmoreoftheresourcesusedinproductionateachresourceprice,including labor. Question38#45249 Youranswer:Awascorrect! Intheshortrun,anincreaseinthemoneysupplywillincreaseaggregatedemand.Thenew shortrunequilibriumwillbeatahigherpricelevelandagreaterlevelofrealoutput(GDP). Question39#45250 Youranswer:Bwascorrect! [...]... earnings Question 56 ­ #45 26 6 Your answer: B was correct! Beginning shares (100,000)( 12) = 1 ,20 0,000 New shares (20 ,000)(7) = 140,000 Stock dividends (beginning shares) (10,000)( 12) = 120 ,000 Stock dividends (new shares) (2, 000)(7) = 14,000 Total = 1,474,000 / 12 = 122 ,833 = 7,000 = 129 ,833 Convertible bonds Diluted number of shares (1,000) (21 )(4) = 84,000/ 12 122 ,833 + 7,000 Question 57 ­ #45 26 8 Your answer:... period is 2. 48 years Year Net cash flow Net cash flow discounted at 12% Cumulative discounted net cash flows 0 1 2 3 4 ?5,000.00 $1,900.00 $1,900.00 $2, 500.00 $2, 000.00 ?5,000.00 $1 ,69 6.43 $1,514 .67 $1,779.45 $1 ,27 1.04 ?5,000.00 ?3,303.57 ?1,788.90 ?9.45 $1, 26 1 .59 Question 70 ­ #4 528 2 Your answer: C was correct! PV of cash inflows = $6, 26 1 .59 (Sum of cash inflows discounted at 12% ) Less: PV of cash outflows... liabilities: 4 16, 667 Current liabilities would need to decrease by 500,000 ?4 16, 667 = $83,333 X= Question 65 ­ #4 527 7 Your answer: B was correct! PMT = 800,000; FV = 10,000,000; N = 5; I/Y = 8 .25 ; CPT → PV = $9,900,837 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第 6 本解释！买本公司 notes 看的舒心，用的放心，祝您一次通过！ 杨帆 13818157537 CFA 资料专卖 欢迎广大考友订购！ Interest expense = 9,900,8 36. 51 × 0.0 825 = $8 16, 819.01 Year­end adjustment = 8 16, 819.01... which will increase gross profit by 5,000 and net income by (5,000)(1 ?0 .28 ) = +3 ,60 0 Question 61 ­ #4 527 2 Your answer: B was correct! COGS FIFO = COGS LIFO ?(ending LIFO reserve ?beginning LIFO reserve) 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第 6 本解释！买本公司 notes 看的舒心，用的放心，祝您一次通过！ 杨帆 13818157537 CFA 资料专卖 欢迎广大考友订购！ COGS FIFO = 27 ,000 ?(1,400 ?1 ,20 0) = $ 26 , 800 Question 62 ­ #4 527 3 Your answer: B was correct!... #45338 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第 6 本解释！买本公司 notes 看的舒心，用的放心，祝您一次通过！ 杨帆 13818157537 CFA 资料专卖 欢迎广大考友订购！ Your answer: A was correct! The dealer pays the fixed rate for 91 days Dealer payment = (5.50%)(91/ 365 )($50M) = $68 5 ,61 6.44 The fund pays the return on the Midcap index: The dealer is the net payer = $68 5 ,61 6.44 ? $67 8, 929 . 12 = $6, 687. 32 Question 115 ­ #45339 Your answer: D was correct!... divided by the product of the standard deviations Year Stock 1 (x­avg )2 Stock 2 (x­avg )2 99 12 16 5 0 00 15 49 0 25 01 ? 121 10 25 avg = 8 sum =1 86 avg = 5 sum = 50 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第 6 本解释！买本公司 notes 看的舒心，用的放心，祝您一次通过！ 杨帆 13818157537 CFA 资料专卖 欢迎广大考友订购！ To find the covariance, we must take the cross products of the differences Year Dif Stock 1 Dif Stock 2 Cross Product 99 4 0... operations and increase profitability in the early years Question 63 ­ #4 527 4 Your answer: A was correct! Question 64 ­ #4 52 76 Your answer: A was correct! First find the current ratio: Next, use algebra to solve for the level of current assets that would satisfy a current ratio of 2. 4: X = 1 ,20 0,000 1 ,20 0,000 ?1,000,000 = 20 0,000 so current assets would need to increase by $20 0,000 Do the same thing... payments (N = 20 ; I/Y = 10%; FV = 0; PV = 2 million) are $23 4,919 First­year interest is 10% × $2 million = $20 0,000 First­year principal payment is $23 4,919 ? $20 0,000 = $34,919 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第 6 本解释！买本公司 notes 看的舒心，用的放心，祝您一次通过！ 杨帆 13818157537 CFA 资料专卖 欢迎广大考友订购！ After­tax cash flow is [300,000 ?20 0,000 ?60 ,000 ?35,000](1 ?0.35) ? 34,919 + 60 ,000 = 28 ,331 Question 118 ­ #453 42 Your... Question 52 ­ #45 26 3 Your answer: B was correct! Operating leverage Question 53 ­ #45 26 4 Your answer: A was correct! If equity equals 45% of assets and current liabilities equals 20 %, total long­term debt must be 35% CA = 0.1 + 0.15 + 0 .20 = 0.45 Question 54 ­ #45 26 5 Your answer: C was correct! ROE = EAT / Equity = (0.15)(800) / (0.45) (2, 000) = 0.133 or 13.3% 彩色原版印刷书籍，用解释向您诠释真正原版影印，别家均是用我司书籍再次复 印，没有第 6 本解释！买本公司... rate, the implicit lease rate of 8%, to calculate the present value of the 10 lease payments, which is $20 ,000 The annual interest is calculated using the 8% rate and the $20 ,000 present value of the lease liability at the initiation of the lease = $2, 000 Interest expense (nonoperating expense) = ( $20 ,000)(0.08) = $1 ,60 0 Total reported lease expense = $3 ,60 0 Question 67 ­ #4 527 9 Your answer: B was correct!