Question
For bonds, assume coupons paid semi-annually, coupon rates and yields quoted with semi-annual compounding, and redeemable at par unless otherwise noted - Andy borrows $150,000
For bonds, assume coupons paid semi-annually, coupon rates and yields quoted with semi-annual compounding, and redeemable at par unless otherwise noted
- Andy borrows $150,000 for 7 years at an annual effective interest rate of 4%. Andy can repay this loan using the amortization method with payments of P at the end of each year. Instead, Andy repays the loan using a sinking fund that pays an annual effective rate of 5%. The deposits to the sinking fund are equal to P minus the interest on the loan and are made at the end of each year for 7 years. Determine the balance in the sinking fund immediately after the repayment of the loan.
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