Final answer:
Letitia's loan is an amortized loan, where she repays part of the principal and the interest each year for four years. This type of loan is structured so that payments are made periodically, reducing both interest and principal over the term of the loan. Therefore, based on the information provided, Letitia's loan falls into the category of an amortized loan, which is option 1 in the multiple-choice listings.
Step-by-step explanation:
Letitia borrowed $6,000 from her bank and must repay $1,500 plus the annual interest each year over four years. This scenario describes an amortized loan, where the payments are spread out over time and include both principal and interest. With an amortized loan, each payment goes towards paying off the interest first, with the remainder reducing the principal balance. Over time, as the principal decreases, the proportion of the payment that goes towards the principal increases.
It is different from the listed alternatives, such as an interest-only loan, where the borrower pays only the interest for an initial period while the principal remains unchanged, and a pure discount loan, which would require the full repayment of principal and accumulated interest at the end of the loan term rather than in periodic installments. Blended discount loans and complex loans are not common terms and might refer to more complicated lending structures.