David Borrowed $120,000 for His Business to Be Repaid in Six

Multiple Choice

David borrowed $120,000 for his business to be repaid in six equal annual installment. The lender charges 6.5 percent interest on the amount of the loan balance that is outstanding at the beginning of each year. The interest component in the amount of the annual installment will be the smallest at the end of:

A) sixth year.
B) first year.
C) third year.
D) fourth year.
E) fifth year.