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On December 31, 2020, Reagan Inc, signed a lease with Silver Leasing Co. for some equipment having a seven year useful life. The lease payments
On December 31, 2020, Reagan Inc, signed a lease with Silver Leasing Co. for some equipment having a seven year useful life. The lease payments are made by Reagan annually beginning at signing date. Title does not transfer to the lessee, so the equipment will be returned to the lessor on December 31, 2026. There is no purchase option, and Reagan guarantees a residual value to the lessor on termination of the lease Reagan's lease amortization schedule appears below: Payments Interest Dec. 31 2020 2e2e 2021 2022 2023 2024 $89, 100 $89, 100 $89, 100 $89, 100 $89, 109 $89, 109 $35,600 $33,102 28,062 22,568 16,580 10,054 2,939 Decrease in Outstanding Balance Balance $456,895 $89, 100 367,795 55,998 311,797 61,038 250,758 66,532 184,226 72,520 111,707 79, 846 32,660 32,661 2025 2026 What is the effective annual interest rate charged to Reagan on this lease? Multiple Choice O 11% O O 19%. O O 9%. O O 3%
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