Answer:
The number of years needed to repay the loan is 11.47 years or 11 years.
Step-by-step explanation:
The loan amount, Present value = $14000
Annual repayment amount (annuity) = $1800
Interest rate = 7% per annum.
Now we have to find the number of years consumed to repay the loan amount. Below is the calculation.
Present value = (Annuity[1-(1+r)^-n] )/ r
14000 = (1800 × [1- (1+ 0.07 )^-n] )/ 0.07
14000 × 0.07 = 1800 × [1- (1+ 0.07 )^-n]
980 = 1800 × [1- (1+ 0.07 )^-n]
0.54 = [1- (1+ 0.07 )^-n]
n = 11.47 or 11 years.
