In the United States, most auto leases give the lessee (i.e., the person who drives the car and makes the lease payments) the option to buy the car at a pre-determined fixed price at the end of the lease.

a) Identify (i) whether this option is a put or a call, and (ii) whether it is European or American style in nature. b) You work as a financial analyst in the leasing division of MegaStar Motors, Inc., and you have been asked to estimate the value of this buyout option. Nametwo parameters you would consider as inputs to the pricing model you would use to value this option.