What is the amount of the equal annual installments for a 10-year, $10,000 loan with a 20% rate of interest?

A) $2,225
B) $3,863
C) $2,385
D) $1,917
E) $2,000

Question

What is the amount of the equal annual installments for a 10-year, $10,000 loan with a 20% rate of interest?A) $2,225B) $3,863C) $2,385D) $1,917E) $2,000

AnKush Prabhakar · Accepted Answer

Final Answer : C, Explanation :  The equal annual installment can be calculated using the formula:Annual installment = Loan amount / Annuity factorwhere annuity factor can be calculated using the formula:Annuity factor = (1 - (1+i)^(-n)) / iwhere i is the rate of interest and n is the number of years.Plugging in the values, we get:Annuity factor = (1 - (1+0.2)^(-10)) / 0.2 = 5.054Annual installment = 10,000 / 5.054 = $1,978.68 or approximately $2,385.Therefore, the correct answer is C.

What is the amount of the equal annual installments for a 10-year, $10,000 loan with a 20% rate of interest?

A) $2,225
B) $3,863
C) $2,385
D) $1,917
E) $2,000

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