Question

As of August 2018, the US national debt was $20 trillion. Suppose that we decide as a nation to (i) stop adding to the debt, effective immediately, and (ii) be debt free in 25 years. How much would we need to pay each year, assuming an interest rate of 6%, compounded annually?

A) $2.433 trillion
B) $1.564 trillion
C) $0.837 trillion
D) $1.252 trillion

Answer 1

The answer is B) $1.564 trillion

Step-by-step explanation:

PV of annuity = P[(1-(1.06)^-25) /0.06)]

20 trillion = P[(1-(1.06)^-25) /0.06)]

20 trillion = 12.78P

P = $1.564 trillion