Inga took out a \$10,000 loan at an annual interest rate of 6%, to be repaid in equal annual installments of \$1,500. After making payments for 4 years, how many more years will it take Inga to fully pay off the loan?

• A. Approximately 3 more years
• B. Approximately 2 more years
• C. Approximately 5 more years
• D. Approximately 7 more years

Answer: (C)

Verified step by step guidance

1. Step 1: Calculate the total amount paid by Inga over the 4 years by multiplying the annual installment amount (\$1,500) by the number of years (4).
2. Step 2: Determine the remaining loan balance after 4 years by subtracting the total payments made from the original loan amount (\$10,000).
3. Step 3: Account for the interest accrued on the remaining balance. Use the formula for simple interest: Interest = Principal × Rate × Time, where the rate is 6% annually.
4. Step 4: Add the accrued interest to the remaining balance to determine the updated loan balance that needs to be repaid.
5. Step 5: Divide the updated loan balance by the annual installment amount (\$1,500) to calculate the number of years required to fully pay off the loan. Round the result to the nearest whole number.