Question
Demarco Electronics took a loan of $200,000 from a bank to purchase testing equipment to improve the quality of its electric meters. It set up
Demarco Electronics took a loan of $200,000 from a bank to purchase testing equipment to improve the quality of its electric meters. It set up a sinking fund to retire the debt in six years and made equal payments at the beginning of every 6 months to this fund. The loan was received at 7.5% compounded semi-annually and the sinking fund was earning 7% compounded semi-annually.
a. Calculate the periodic cost of the debt.
Round the sinking fund payment up to the next cent
b. Calculate the book value of the debt at the end of 3 years.
Round to the nearest cent
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