Refer to the Following Lease Amortization Schedule

question 201

Multiple Choice

Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,000 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight years.

-What is the effective annual interest rate?

• A) 9%.
• B) 10%.
• C) 11%.
• D) 20%.

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