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: Decrease in Balance Dec. 31 Payments Interest 2020 2020 $79,700 2021 $79,700 $24,363 2022 $ 79,700 20,489 2023 $79,700 16,345 2024 $ 79,700 11,910 2025 $79,700 7,164 2026 $31,900 2,087 $ 79,700 55,337 59,211 63,355 67,790 72,536 29,813 Outstanding Balance $427,742 348,042 292,705 233,494 170,139 102,349 29,813 0 What is the effective annual interest rate charged to Reagan on this lease