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

Quizplus · Accepted Answer

The equal annual installment can be calculated using the formula:
Annual installment = Loan amount / Annuity factor
where annuity factor can be calculated using the formula:
Annuity factor = (1 - (1+i)^(-n)) / i
where 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 = 5.054
Annual 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