FRA question - Tips for lining up lease amortization?

CFA Level II
#1

I am consistently getting tripped up on how to line up a lease amortization based on whether the payments are made at the beginning of the year or the end of the year. It’s worst when they give you the second year’s present value of payments and trying to figure out the timeline. Anyone with any tips? Below is the table I write out to come up with the calcs:

PMT INT DEP Total lease cost AMORT Ending Balance

0

1

2

#2

I’d add a column on the left: Beg. Balance.

Other than that, it’s the way I’d do it. The only difference between BOP and EOP payments is whether you subtract the payment before or after you calculate the interest charge.

#3

So if it’s a beginning of period payment and they give me the present value of lease payments, let’s say $10,000 with a monthly payment of $1000, an interest rate of 5% and SL depreciation over ten years. My table would look like:

Time Beg Bal Pmt Int Dep Total cost Amort End Bal

0 10000 1000 1000 9000

1 9000 1000 450 900 1350 550 8450

2 8450 1000 422.5 900 1322.5 577.5 7872.5

Same scenario only EOP:

Time Beg Bal Pmt Int Dep Total cost Amort End Bal

0 0 10000

1 10000 1000 500 1000 1500 500 9500

2 9500 1000 475 1000 1475 525 8975

Does that look right?

#4

Yeah, any time I am doing stuff like this (even with performance stuff at work), I always have a beginning and ending column…makes it very clear. you can follow the numbers that way. Problem is timing for the exam, these tables take a lot of time