Lessor Company and Lessee Company agreed to a lease. The lessor’s cost of the leased asset is $38,000 and its current fair value is $40,000. While the lease term is 4 years, the estimated useful life of the asset is six years (zero residual at that time). The lease begins on January 1, 2020, and there is an estimated unguaranteed residual value of the leased asset at the end of the lease term (4 years) of $4,000. There is a purchase option in this lease, whereby the lessee can buy the asset at the end of the lease term for $4,500. The asset reverts to the lessor unless the lessee purchases it at the end of the lease. Four annual lease rentals due on January 1 of each year: $11,643. Required:
1. What was the lessor's implicit interest rate in this lease?
2. What type of lease was this to the lessee? To the lessor? Explain.
3. What entries would the lessor and lessee make in year 2020?

Variable rate cd’s = $90 treasury bills = $150 discount loans = $20 treasury notes = $100 fixed rate cds = $160 money market deposit accts. = $140 savings deposits = $90 fed funds borrowing = $40 variable rate mortgage loans $140 demand deposits = $40 primary reserves = $50 fixed rate loans = $210 fed funds lending = $50 equity capital = $120 a. develop a balance sheet from the above data. be sure to divide your balance sheet into rate-sensitive assets and liabilities as we did in class and in the examples. b. perform a standard gap analysis and a duration analysis using the above data if you have a 1.15% decrease in interest rates and an average duration of assets of 5.4 years and an average duration of liabilities of 3.8 years. c. indicate if this bank will remain solvent after the valuation changes. if so, indicate the new level of equity capital after the valuation changes. if not, indicate the amount of the shortage in equity capital.