Refer to the Following Lease Amortization Schedule

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%.