Jones borrows $2,000 for five years at an annual effective interest rate of 5%. Jones has two options for repayment: (a) She can make level payments at the end of each year for five years, or (b) She can accumulate the principal by making equal payments at the end of each year into a sinking fund. She would also make annual interest payments to the creditor. If the sinking fund earns 4%, how much more would Jones pay in total for option (b) than for option (a)?

Problem 7: Jones borrows $2,000 for five years at an annual effective interest rate of 5%. Jones has two options for repayment: (a) She can make level payments at the end of each year for five years, or (b) She can accumulate the principal by making equal payments at the end of each year into a sinking fund. She would also make annual interest payments to the creditor. If the sinking fund earns 4%, how much more would Jones pay in total for option (b) than for option (a)