You may use your financial calculator or present value tables for this question. Firm A leased equipment with a list price $1,215,800, a lease life of 20 years, an initial (down) payment of $100,000, and an annual payment of $100,000 for 19 additional periods. What is the implied lease contract interest rate?

Select one:

a. 6% ($1,215,800 - $100,000 = $100,000 x 11.1580; 11.15812 [Present Value of Annuity of $1 @ 6% for 19 periods])

b. 4% ($1,215,800 = $100,000 x 12.1580; 12.65930 [Present Value of Annuity of $1 @ 4% for 18 periods])

c. 5% ($1,215,800 = $100,000 x 12.1580; 12.08532 [Present Value of Annuity of $1 @ 5% for 19 periods])

d. 3% ($1,215,800 = $100,000 x 12.1580; 12.56110 [Present Value of Annuity of $1 @ 3% for 16 periods])