On March 2, Conroy and Conrad Inc. obtained a loan for $120,000 for 5 years at 7%. Payments are $2,000. What type of

Question

On March 2, Conroy and Conrad Inc. obtained a loan for $120,000 for 5 years at 7%. Payments are $2,000. What type of loan is this considered to be?

Help In Homework · Accepted Answer

Based on the limited data, we can classify the loan as follows:

1. The loan is an interest-bearing loan. An interest-bearing loan is a loan where the interest rate is stated on the face of the note or in the contract. There non-interest bearing notes wherein no interest was stated in the note.

2. Annuity Loan. An annuity loan is a loan which will be paid in equal installments with equal intervals. In the case above, it will be paid in amounts of 2,000. This is in contrast with loans that are paid in lump-sum, payment. Meaning, instead of paying in installments, it will be paid using a one-time payment.