With explanation

5.6 Loans: the sinking fund method e.g. 1 An investor wishes to take out a loan at an annual effective interest rate of 9% and buy a 10-year annuity whose present value is 1,000 calculated at an annual effective interest rate of 8% to pay it back. The loan is to be repaid over the next 10 years with annual end-of-year interest payments. Annual end-of- year sinking fund deposits are also to be made that are credited at an annual effective interest rate of 7% Calculate the amount of the loan