Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A loan of $10,000 is repaid over 6 years using one of the following two methods: Amortization with annual end of year payments based on
A loan of $10,000 is repaid over 6 years using one of the following two methods: Amortization with annual end of year payments based on an annual effective rate of 7.5%. The sink fund method, where the borrower pays the lender interest at rate i at the end of each year. The borrower also makes end of year deposits into a sinking fund earning an annual effective rate of 6% to repay the principal in 6 years. Find the annual amortization payment to the nearest cent. Number Find the sink fund deposit to the nearest cent. Number Find the rate of interest i that will make both repayment methods have the same annual cost. (Give your answer in decimal format to 4 decimal places) Number
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started