Final answer:
A $15,000 loan at 5% annual interest to be repaid in one year as a lump sum is termed a term loan. The total repayment amount will include the principal and the simple interest, resulting in $15,750 due at the end of the year. Knowledge of such financial terms is crucial for personal and business financial planning.
Step-by-step explanation:
If you borrow $15,000 today at 5% annual interest to be repaid in one year as a lump sum, this is termed a term loan or single payment loan. This type of loan involves borrowing a set amount of money and agreeing to pay back the entire amount plus interest in one single payment at the end of the loan term. The calculation for the total repayment amount involves finding the simple interest on the loan. Simple interest can be calculated using the formula: Interest = Principal × Rate × Time. For the borrowed amount of $15,000 at a 5% annual interest rate to be paid back in one year, the interest would be $750 (15,000 × 0.05 × 1).
The total repayment amount would thus be the principal plus the interest, which equals $15,750. Understanding these terms and calculations is important for both personal and business financial planning. For instance, many college students borrow money to pay expenses, with the expectation of repaying these funds once they graduate and become employed. Similarly, businesses may take out loans for projects, expecting future profits to enable repayment. The confidence in repayment abilities affects the demand for financial capital.