1. A 12-year loan of 14,000 is to be repaid with payments at the end of...

 

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1. A 12-year loan of 14,000 is to be repaid with payments at the end of each year consisting of interest on the loan and a sinking fund deposit. Interest on the loan is charged at a 10.5% annual effective rate. The sinking fund's annual effective interest rate is 7%. However, beginning in year 7, the annual effective interest rate on the sinking fund drops to 4%. As a result, the annual payment to the sinking fund is then increased by X. Calculate X. 1. A 12-year loan of 14,000 is to be repaid with payments at the end of each year consisting of interest on the loan and a sinking fund deposit. Interest on the loan is charged at a 10.5% annual effective rate. The sinking fund's annual effective interest rate is 7%. However, beginning in year 7, the annual effective interest rate on the sinking fund drops to 4%. As a result, the annual payment to the sinking fund is then increased by X. Calculate X.

Answer rating: 100% (QA)

1 Calculate the annual interest payment on the loan for year 1 Interest Payment in Year 1 ... View the full answer