A Bank Is Negotiating a Loan

question 97

Multiple Choice

A bank is negotiating a loan.The loan can either be paid off as a lump sum of $100,000 at the end of five years,or as equal annual payments at the end of each of the next five years.If the interest rate on the loan is 10%,what annual payments should be made so that both forms of payment are equivalent?

• A)$12,000
• B)$16,380
• C)$19,588
• D)$20,000
• E)$18,000