The business manager of the Rock City Central School District commented at a school board meeting that in 7 years the district will have a loan coming due that will require $996,423 to pay. He recommended that the district should prepare for this payment by setting funds aside each year in an account paying 3.09% to build up the needed balance.

a.)

According to his plan, how much should each payment be?

b.)

How much interest will the district end up paying on this loan? Because they are making payments into a sinking fund rather than paying one lump sum after 7 years, they will earn interest on their annual payments. Although the interest will not be kept by the District but rather used to pay their debt, it is still earned interest. How much interest will they earn?