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Olivia can repay her loan L using either the amortization method or the sinking fund (SF) method. The annual effective interest rate charged on
Olivia can repay her loan L using either the amortization method or the sinking fund (SF) method. The annual effective interest rate charged on the loan, i, is equal under both methods. The annual effective interest rate earned on the sinking fund is j. i and j remain constant over the term of the loan. The payments under the amortization method are level. Also, the payments under the sinking fund method are level. Let k be measured in years. Without the added functionality of a financial calculator, complete the following two tables. Be sure to show all your work. Schedule under amortization method: k | Bk Payment at k+1 Ik+1 Pk+1 Bk+1 0 17,775.3529 1 2 0 Schedule under sinking fund method: k Interest paid to lender SF deposit AV in SF at k +1 at k +1 at k +1 0 1 1,893.8940 2 Book value of debt after (k+1)th payment 17,699.3882 0 Note: There is no need to round payments to the nearest cent. In this question, you may use: the solution to the cubic equation ar+ba+cx+d= 0 is 1/3 x = {q + [g + (r = p)]2}/ + {q [q + (r p)] } + P, where q=p+ 3 bc-3ad T= 6a 027 Schedule under Amortization method: k Payment at k+1 Ik+1 Pkti + 0 1,893.8940 17,775.3529 117,775.3529 2 0 Schedule under Sinking Fund method: AV in SF k Interest paid to lender at K+1 Sf deposit at k+1. at K+1 0 1,893.8940 + 1,893.8940 2 1893.8940 Book Value of debt ofter (k+1)th payment 17,699.3882 0
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