Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,600 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.

payment cash payment Effective Interest Decrease in Balance Outstanding Balance

39,560

1 9,100 30,460

2 9,100 3,046 6,054 24,406

3 9,100 2,441 6,656 17,747

4 9,100 1,775 7,325 10,422

5 9,100

6 9,100 236 2,364 0

What is the effective annual interest rate?