JASON has borrowed $8,000 for 8 years at 6% compounded semi-annually. He will repay interest every 6 months plus principal at maturity. He will also deposit X every 6 months into a sinking fund paying 5% compounded semi-annually to pay off the principal at maturity.

a) Find X.

JASON goes bankrupt at the end of year 6, just after making his interest payment and sinking fund deposit. The bank confiscates the money in the sinking fund, but gets no further payments.

b) How much money does the bank lose as a result of the loan default at the end of year 6?

c) Over the lifetime of the loan, how much money did the bank collect? Was it more or less than the amount of the original loan?

d) Assuming the bank re-invested all of JASON payments at 6% (compounded semi-annually), how much money does the bank have at the end of 6 years? What is the equivalent yield (compounded semi-annually) they made on their initial loan?