A loan of Rs. 10,000 is repaid by three equal annual payments of Rs. 4,021.15 at 10% interest. Which type of repayment does this represent?
Correct answer: A. A level ordinary annuity
- A. A level ordinary annuity
- B. A level annuity due
- C. A perpetuity payment
- D. A simple-interest payment
Explanation
The present value of three end-of-year payments of Rs. 4,021.15 at 10% is approximately Rs. 10,000. This is a level ordinary annuity because the equal payments are made at the ends of the years.
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