A lender lends $10 000, which is to be repaid in annual payments of $2 000 for 6 years. Which of the following shows the timeline of the loan from the lender's perspective?

Question

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The lender lends $10 000, which means there is a cash inflow of $10 000 at the beginning (Year 0) of the loan. The borrower will make annual payments of $2 000 for 6 years, which means there will be cash inflows of $2 000 at the end of each of those 6 years (Years 1-6), and then the loan will be fully repaid. Therefore, the cash inflows are as follows:
Year 0: $10 000
Year 1: $2 000
Year 2: $2 000
Year 3: $2 000
Year 4: $2 000
Year 5: $2 000
Year 6: $2 000

Option B correctly shows this timeline, with the cash inflows occurring at the end of each year. Option A shows the cash inflows occurring at the beginning of each year, which is incorrect. Option C shows only 5 years of repayments, which is also incorrect. Option D shows the cash inflows occurring at irregular intervals, which is also incorrect.

A Lender Lends $10 000, Which Is to Be Repaid