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15 July, 18:19

Francis is competing with his brother Benedict to see who can pay off a loan faster. They both borrow $2,000 at an interest rate of 6%. Francis will start paying back his loan today making annual payments of $100. Benedict starts making payments 4 years from now and pays $150 per year. Who pays off their loan sooner?

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  1. 15 July, 19:57
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    Benedict will take less time pay off his loan as compared to his brother Francis. If Francis pay off $100 per year then it will take almost 20 years to pay him off the loan and approx two years for the interest which will be accumulating 6% annually and will become almost $120 in 20 years, whereas, Benedict, starting from 4 years from now by paying $150 per year will take

    1Year 2Year 3 Year 4Year 5Year 6Year 7Year 8Year 9Year

    $0 $0 $0 $0 $150 $150 $150 $150 $150

    10Year 11Year 12Year 13Year 14Year 15Year 16year 17Year 18Year

    $150 $150 $150 $150 $150 $150 $150 $150 $150 = $2000

    Therefore, Benedict will take less time to pay off his loans.
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