Question

If you borrow​ $100,000 at an annual rate of​ 8.00% for a 10minusyearperiod and repay with 10 equal annual endminusofminustheminusyearpayments of​ $14,902.95, then you have just repaid what type of​ loan?

Answer 1

Amortized loan

Step-by-step explanation:

An amortized loan is a loan with scheduled periodic payments that are applied to both principal and interest. An amortized loan payment first pays off the relevant interest expense for the period, after which the remainder of the payment reduces the principal.

Interest is calculated based on the most recent ending balance of the loan and the interest amount owed decreases as payments are made. This is because any payment in excess of the interest amount reduces the principal, which in turn, reduces the balance on which the interest is calculated.