Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,400 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.

Lease Payment	Cash Payment	Effective Interest			Decrease in Balance			Outstanding Balance
									39,580
1	8,800		??			??			30,780
2	8,800		2,462			6,338			24,443
3	8,800		1,955			6,845			17,598
4	8,800		1,408			7,392			10,206
5	8,800		??			??			??
6	2,400		178			2,222			0

What is the total interest paid over the term of the lease?

Multiple Choice

• $4,948

• $6,820

• $46,400

• 3,712