A Sum of $110,000 Is to Be Repaid Over a 9-Year

question 140

Multiple Choice

A sum of $110,000 is to be repaid over a 9-year period through equal installments made at the end of each year. If an interest rate of 11%/year is charged on the unpaid balance and interest calculations are made at the end of each year, determine the size of each installment so that the loan (principal plus interest charges) is amortized at the end of 9 years. Round your answer to the nearest cent. ​

• A) R = $19,889.71
• B) R = $19,808.83
• C) R = $19,866.18
• D) R = $19,828.70

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Definitions:

Equity

The value of an owner's interest in a property or business, calculated as the difference between the assets and liabilities.

Cash Flow on Total Assets

A measure of the efficiency with which a company generates cash from its assets, calculated as cash flow from operations divided by total assets.

Ability to Meet Obligations

A financial assessment of whether a company or individual has the resources necessary to pay off their debts as they come due.

Return on Assets

A profitability ratio that measures how efficiently a company is using its assets to generate earnings.