21) A loan of 102 000 is to be pad back equal annual instaiments 1f th...
Calculation of Total Interest Charged:
To calculate the total interest charged in this installment plan, we need to use the formula for the present value of an annuity:
PV = PMT x ((1 - (1 + r)^-n) / r)
where:
PV = present value of the loan (in this case, 102,000)
PMT = equal annual installment
r = annual interest rate (4%)
n = number of payments (in this case, 30)
Using this formula, we can calculate the annual installment as follows:
102,000 = PMT x ((1 - (1 + 0.04)^-30) / 0.04)
PMT = 102,000 / ((1 - (1 + 0.04)^-30) / 0.04)
PMT = 5,905.85
Therefore, the annual installment is 5,905.85.
To calculate the total interest charged, we can subtract the total amount paid (equal to the annual installment multiplied by the number of payments) from the original loan amount:
Total amount paid = PMT x n
Total amount paid = 5,905.85 x 30
Total amount paid = 177,175.50
Total interest charged = 102,000 - 177,175.50
Total interest charged = -75,175.50
As we can see, the total interest charged is negative, which means that the borrower will actually receive interest instead of paying it. This is because the annual installment is greater than the interest that would be charged on the loan. Therefore, the correct answer is not provided in the options given.
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