Question: On December 3 1 , 2 0 1 8 , Federal Inc. signed a lease with Gold Leasing Co . for some equipment having a

On December

31, 2018,

Federal Inc. signed a lease with Gold Leasing Co

.

for some equipment having a seven

-

year useful life. The lease payments are made by Federal annually, beginning at signing date. Title doesn't transfer to the lessee, so the equipment will be returned to the lessor on December

31, 2024 .

There's no purchase option, and Federal guarantees a residual value to the lessor on termination of the lease.

This is Federal's lease amortization schedule.

\

table

[[

Dec

. 31,

Payments,Interest,Decrease in

,

Outstanding

], [,,,

Balance,Balance

], [2018,,,,

519, 115

What is the effective annual interest rate charged to federal on this lease

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