A loan of $60,000 is due 10 years from today. The borrower wants to make annual payments

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A loan of $60,000 is due 10 years from today. The borrower wants to make annual payments at the end of each year into a sinking fund that will earn compound interest at an annual rate of 10 percent.
a. What would annual payments have to be in order to accumulate $60,000 at the end of 10 years in order to repay the loan?
b. Suppose that instead of annual payments, the borrower can make monthly payments that will earn 10% interest compounded monthly. What would the monthly payments have to be to accumulate the $60,000?
c. Compare the total of all 10 annual payments in (a) with the total of all 120 monthly monthly payments in (b). Which would require the lower total cash outflow?

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a Annual sinking fund payments required to accumulate 60000 after ten years b Monthly s...View the full answer

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