Question: RM60,000 is borrowed for 12 years at 5% compounded annually. The borrower does not pay interest currently and will pay all accrued interest at the

RM60,000 is borrowed for 12 years at 5% compounded annually. The borrower does not pay interest currently and will pay all accrued interest at the end of 12 years together with the principal.

(a) Find the amount annual sinking fund deposit necessary to liquidate the loan at the end of 12 years if the sinking fund earns 3% yearly compounding and the borrower make first payment immediately.

(b) Prepared a sinking fund schedule.

Ans: (a) RM 7,371.25

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