Lucas borrows 4300 for 11 years he can repay the loan using, Ask an Expert

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Lucas borrows $4300 for 11 years. He can repay the loan using the following two methods:

(i) amortization method with equal annual payments of R at an annual effective interest of 6%.

(ii) sinking fund method in which the lender receives an annual effective rate of 7.12% and the sinking fund earns an annual effective rate of jj.

If both methods require the same total annual payment R to be made at the end of each year for 11 years, calculate jj.

st: Under the amortization method, the annual payment is R=

2nd: Under the SF method, the annual interest payment is I=

3rd: The sinking fund deposit is D=

4th: The sinking fund annual effective rate is j=

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92099775

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