## Glossary

Annual Percentage Rate (APR) is the total cost the borrower pays each year to repay the loan amount, including fees, expressed as a percentage. In the leasing the equivalent of APR is the Implicit Rate.

The weighted average length of time it will take to fully repay the outstanding principal on lease or loan.

The program will first calculate the level payment amount necessary to amortize the loan amount over the specified amortization period. The program will then use that payment amount to calculate the balloon amount that will balance the current loan amount using the calculated payment amount.

The date when the periodic lease payments commence. If the base term start date occurs after the funding date, an interim term will be created, and one non-periodic lease payment will be added to the payments schedule. To remove an interim payment set the base start date equal to the funding date. For a monthly payment frequency, the base start date cannot occur more than 90 days after the funding date. For all other payment frequencies, the interim term cannot exceed the number of days in the payment frequency.

Enter a buy rate and the program will solve for the amount fee to be paid by the buyer of the Lease (the Buy Fee). Alternatively, enter a fee paid and the program will solve for the buy rate. To remove a Buy Fee from reports set the fee paid equal to 0.00 or set the buy rate equal to the Lease interest rate.

A new Lease will be created from the payment groups of the existing Lease that occur on and after the cut-off date as selected by the user. If an EBO exists in the current Lease, it will also be included in the new Lease. The ideal application for the Cut-Off method is the purchase of a seasoned lease out of portfolio.

Short for daily equivalent of all payments. It is a payment type that is used for interim periods only. Calculates the average per diem rent of all the payment periods following the interim period and then multiplies that amount by the number of days in the interim period to arrive at the interim payment.

The parameters for the default new lease can be set to those specified by the user. First, create the preferred lease structure. Then return to Preferences screen and switch on “use saved” and “save current”. Thereafter, when New is selected from the Side Menu the user’s saved parameters will be loaded. The default new lease parameters can be reset to the original parameters by turning off those same switches.

Short for daily equivalent of the next payment. It is a payment type that is used for interim periods only. Calculates the per diem rent of the payment period immediately following the interim period and then multiplies that amount by the number of days in the interim period to arrive at the interim payment.

The EBO exercise date must occur on or before one year prior to the Lease’s maturity date but no earlier than the first anniversary date of the Lease. The amount of the EBO must greater than 1.005 times the par value of the Lease on the EBO exercise date but less than or equal to the Lease Amount.

The EBO amount can be calculated given a spread in basis points over the lease interest rate, or it can be entered manually. If entered manually the spread will be automatically calculated. Upon returning to the EBO screen a specified EBO amount will be presented as a calculated amount. The slider value will be accurate to +/- 1 basis point. To remove an EBO from reports set the spread equal to 0 basis points.

The effective interest rate is the annual interest that reflects the impact of any fees paid by the lessee or borrower. For example the implicit rate reflects all-in cost of the lease to the lessee including any fees the lessee is required to pay. In CFLease, it is the nominal rate after the impact of fees and is different than annual rate after the effect of compounding.

If the base term commencement date starts on last day of a month with 30 days and the rule is on, then the payment due dates for the months with 31 days will occur on the 31st of the applicable month. If the rule is turned off, then the payment due dates for the months with 31 days will occur on the 30^{th}.

The total number of payments for the starting group must be evenly divisible by 12. The resulting escalated payment structure will be a series of consecutive annual payment groups in which the payment amount for each payment group will either the same or is greater than the previous group by the amount of the escalation rate depending on the frequency of the steps.

A graduated payment mortgage (GPM) is a type of fixed-rate mortgage for which the payments increase gradually from an initial low base level to a higher final level. Typically, the payments will grow between 7% to 12% annually from their initial base payment amount until the full monthly payment amount is reached. In order to apply this structure the following must be valid: (1) there must only be one payment group, (2) the payment type and timing must be monthly is arrears, (3) the number of payments cannot be less than 120, and (4) the base term must be evenly divisible by 12.

The implicit rate is the discount rate that equates the present value of the Minimum Lease Payments (MLP) and the unguaranteed residual value to the Lease Amount as of the funding date. Any fees that the Lessee is required to pay in connection with the Lease are also considered part of the MLP. In the lending, the equivalent of the Implicit Rate is the APR. To remove a Lessee Paid Fee from reports set the fee amount equal to 0.00.

Is the nominal annual rate of the lease or the loan. It is equivalent to the coupon rate of a bond.

Is the present value of all Lessee paid fees, all rents due, and any payments or guarantees of the residual value by the Lessee discounted at the lower of the Lessee’s incremental borrowing rate of the implicit rate of the Lease.

The interim period is a non-periodic period from the funding date to the base term commencement date. The interim period is often used so that the periodic payments may occur on a specific date of the month.

TVs are a schedule of values expressed as a percent of Lease amount that are due the lessor in the event of an early termination of the lease. To remove TVs from reports set the discount rates for rent and residual to the maximum values and the additional residual percentage to 0.00%.

For CFLease purposes, a true lease is any lease that includes a residual payment group.

The yield is the effective interest rate of the lease or loan to the lessor / lender when either fees are added to the lease or loan or when the purchase price is different than the specified values of the loan or lease.