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.

Payment	Cash Payment	Effective Interest	Decrease in balance	Outstanding Balance
								88,595
1		14,000		0		14,000		74,595
2		14,000		8,951		5,049		69,547
3		14,000		8,346		5,654		63,893
4		14,000		7,667		6,333		57,560
5		14,000		6,907		7,093		50,467
6		14,000		6,056		7,944		42,523
7		14,000		5,103		8,897		33,626
8		14,000		4,035		9,965		23,661
9		14,000		?		?		?
10		14,000		?		?		?

What is the effective annual interest rate? (Round final answer to the nearest whole percentage.)

Multiple Choice

• 9%.
• 14%.
• 12%.
• 10%.