Which term matches 'a loan repayment that consists of a fixed number of equal payments over time'?

Which term matches 'a loan repayment that consists of a fixed number of equal payments over time'?

• A. Annuity
• B. Mortgage
• C. Collateral
• D. Operating loan

Answer: (A)

This describes an annuity—the idea of a loan repaid with the same payment in each period for a fixed number of periods. Because the payments are equal and the total number of payments is predetermined, you have a steady, level-payment stream that ends after the last payment. In a typical amortizing loan, each payment covers both interest and principal, with the interest portion larger early on and the principal portion growing over time, but the total payment stays the same. The other terms don’t specify this payment pattern: a mortgage is a type of loan secured by real estate, collateral is the asset pledged to secure a loan, and an operating loan is usually a short-term financing tool for daily business needs. So the description most closely matches an annuity.

This describes an annuity—the idea of a loan repaid with the same payment in each period for a fixed number of periods. Because the payments are equal and the total number of payments is predetermined, you have a steady, level-payment stream that ends after the last payment. In a typical amortizing loan, each payment covers both interest and principal, with the interest portion larger early on and the principal portion growing over time, but the total payment stays the same.

The other terms don’t specify this payment pattern: a mortgage is a type of loan secured by real estate, collateral is the asset pledged to secure a loan, and an operating loan is usually a short-term financing tool for daily business needs. So the description most closely matches an annuity.