The correct answer is: A. Capital Recovery Annuity is availed.
A capital recovery annuity is a series of equal payments made over a period of time to repay a loan or other debt. The payments include both the principal amount of the loan and interest. The amount of each payment is calculated so that the loan is repaid in full at the end of the term.
A present worth annuity is a series of equal payments made at regular intervals for a specified number of years, with the first payment made at the beginning of the period. The present worth of an annuity is the amount of money that would need to be invested today at a specified interest rate in order to generate the specified series of payments.
A sinking fund annuity is a series of equal payments made at regular intervals for a specified number of years, with the first payment made at the end of the period. The sinking fund annuity is used to accumulate a specified amount of money by a specified date.
In the given scenario, the seller recovers his capital along with accumulated compensating interest not in one single lump-sum payment but in periodical equal payments, over time. This is an example of a capital recovery annuity.