Today,you borrowed $1000 from your bank for five years at 8 per cent interest.The loan requires that you make a payment of $80 one year from today.Based on this information,it appears that you have a(n):

Question

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The loan requires only one payment of principal at the end of 5 years which means that it is not an amortized loan (A). There is no indication of a discount being applied on the $1000 loan amount, so it is not a pure discount loan (D) or blended discount loan (B). The fact that only interest is paid throughout the loan term until the final payment of $80 is made at the end suggests that it is an interest-only loan (C). Finally, there is no indication that the loan involves any complicated or special terms that would make it a complex loan (E). Therefore, option (C) is the best choice.

Today,you Borrowed $1000 from Your Bank for Five Years at 8