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A $500,000 loan can be amortized over 15 years with annual payments of $58,414.77 at j1= 8% (option A). Alternatively, $500,000 can be borrowed at
A $500,000 loan can be amortized over 15 years with annual payments of $58,414.77 at j1= 8%
(option A). Alternatively, $500,000 can be borrowed at j1=x%,with interest paid at the end of each year and the principal repaid with one lump sum at the end of 15 years
(option B). For option B, a sinking fund can be set up earning j1 = 6%. What is the value of x% such that the annual expense under the two options is the same ?
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