Refer to the Following Lease Amortization Schedule

Multiple Choice

Refer to the following lease amortization schedule. The 10 payments are made annually starting with the beginning of the lease. Title does not transfer to the lessee and there is no purchase option or guaranteed residual value. The asset has an expected economic life of 12 years. The lease is noncancelable.

-What is the effective annual interest rate?

A) 9%.
B) 10%.
C) 11%.
D) 12%.