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A 10-year loan may be repaid under the following two methods: (1) amortization method with equal annual payments of X at the end of each
A 10-year loan may be repaid under the following two methods: (1) amortization method with equal annual payments of X at the end of each year at an annual effective rate of 6% (2) sinking fund method in which the lender receives interest payments I at the end of each year at an annual effective rate of 7%. Also, at the end of each year, level deposits of D are made into a sinking fund which accumulates at an annual effective rate of j. If X = I + D, calculate j.
A) 7.0% B) 7.5% C) 8.0% D) 8.5% E) 9.0%
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