Which of the following factors makes a residual value unguaranteed?

• A. Guarantor is unrelated to the lessor
• B. Guarantor is related to the lessor
• C. Lessee guarantees
• D. No guarantee at all

Answer: (B)

The key idea is how who backs the end-of-lease value affects whether that value is considered guaranteed. A residual value is treated as guaranteed only if there is credible back‑up independent of the lessor. If the guarantor is unrelated to the lessor, that independent backing typically makes the residual value genuinely guaranteed. When the guarantor is related to the lessor, the guarantee isn’t an arm’s-length assurance, so it’s not viewed as a reliable, independent guarantee. In that case, the residual value is treated as unguaranteed.

For contrast, if the lessee themselves guarantees the residual, or if there’s no guarantee at all, the residual value is also unguaranteed.