Jia borrows $50,000 at 10 percent annually compounded interest to be repaid in four equal annual installments. The actual end-of-year loan payment is ________.
A) $10,774
B) $12,500
C) $14,340
D) $15,773

Question

Quizplus · Accepted Answer

The loan repayment can be calculated using the formula for the annuity payment of a loan, which is P = [rPV] / [1 - (1 + r)^-n], where P is the payment, r is the annual interest rate (as a decimal), PV is the present value of the loan, and n is the number of periods. Here, r = 0.10, PV = $50,000, and n = 4. Plugging these values into the formula gives the annual payment, which is approximately $15,773.

Jia Borrows $50,000 at 10 Percent Annually Compounded Interest to Be