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John wishes to borrow 20,000. Lender X and Y offer the following terms: (1) Lender X will be repaid with 15 equal annual payments made
John wishes to borrow 20,000. Lender X and Y offer the following terms:
(1) Lender X will be repaid with 15 equal annual payments made at the end of each year at 5% interest effective annually.
(2) Lender Y charges an annual effective interest rate of i with John accumulating the amount necessary to repay the loan by means of fifteen annual deposits at the end of each year into a sinking fund earning 4% interest effective annually.
(3) The total payment (principal and interest) is the same for lender X as for lender Y.
Calculate i.
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