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Which of the following shows the timeline of the loan from the lender's perspective?

Which of the following shows the timeline of the loan from the lender's perspective?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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**Loan Timeline from the Lender's Perspective** A lender lends $10,500, which is to be repaid in annual payments of $2,020 for 6 years. The question prompts the selection of the correct timeline representation of the loan from the lender's perspective. Below are four options, each representing a timeline of the payments. - **Option A:** - Year 1: $0 - Year 2: $2,020 - Year 3: $2,020 - Year 4: $2,020 - Year 5: $2,020 - Year 6: $2,020 - **Option B:** - Year 1: -$10,500 - Year 2: $2,020 - Year 3: $2,020 - Year 4: $2,020 - Year 5: $2,020 - Year 6: $2,020 - **Option C:** - Year 0: -$10,500 - Year 1: $2,020 - Year 2: $2,020 - Year 3: $2,020 - Year 4: $2,020 - Year 5: $2,020 - Year 6: $2,020 - **Option D:** - Year 0: -$10,500 - Year 1: $2,020 - Year 2: $4,020 - Year 3: $6,020 - Year 4: $8,020 - Year 5: $10,020 - Year 6: $12,020 **Correct Option: C** Explanation: The correct timeline from the lender's perspective would start with the initial loan disbursement of -$10,500 at Year 0, followed by consistent repayments of $2,020 from Year 1 to Year 6.
Transcribed Image Text:**Loan Timeline from the Lender's Perspective** A lender lends $10,500, which is to be repaid in annual payments of $2,020 for 6 years. The question prompts the selection of the correct timeline representation of the loan from the lender's perspective. Below are four options, each representing a timeline of the payments. - **Option A:** - Year 1: $0 - Year 2: $2,020 - Year 3: $2,020 - Year 4: $2,020 - Year 5: $2,020 - Year 6: $2,020 - **Option B:** - Year 1: -$10,500 - Year 2: $2,020 - Year 3: $2,020 - Year 4: $2,020 - Year 5: $2,020 - Year 6: $2,020 - **Option C:** - Year 0: -$10,500 - Year 1: $2,020 - Year 2: $2,020 - Year 3: $2,020 - Year 4: $2,020 - Year 5: $2,020 - Year 6: $2,020 - **Option D:** - Year 0: -$10,500 - Year 1: $2,020 - Year 2: $4,020 - Year 3: $6,020 - Year 4: $8,020 - Year 5: $10,020 - Year 6: $12,020 **Correct Option: C** Explanation: The correct timeline from the lender's perspective would start with the initial loan disbursement of -$10,500 at Year 0, followed by consistent repayments of $2,020 from Year 1 to Year 6.
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