[sagnik2422]

Refer to the following lease amortization schedule. The five payments are made annually starting with the inception of the lease. A $2,000 bargain purchase option is exercisable at the end of the five-year lease. The asset has an expected economic life of eight years.
Lease Payment Cash Payment Effective Interest Decrease in Balance Balance
34,600

1 8,000?? 26,600
2 8,000 2,660 5,340 21,260
3 8,000 2,126 5,874 15,386
4 8,000 1,539 6,461 8,925
5 8,000??
6 2,000 182 1,818 0


Q: What is the effective annual interest rate?
A. 9%.
B. 10%.
C. 11%.
D. 20%.
My work : I thought I was supposed to do 2,660 / 21,260 which got me 12.5% which is not a choice