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Bob borrows 540,000 at annual effective interest rate 3%. She repays this loan by paying off...

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Finance

Bob borrows 540,000 at annual effective interest rate 3%. Sherepays this loan by paying off only the interest due at the end ofeach year to the lender and depositing a level amount Q at the endof each year into a sinking fund account paying 6% APY. The goal isto accumulate the full balance of the loan amount in the sinkingfund at the end of 10 years.

a. Find the level sinking fund deposit.

b. What rate (AEIR) does Anita end up paying on this loan?

c. What is the lender’s APY?

Answer & Explanation Solved by verified expert
3.9 Ratings (529 Votes)
FvAmount of Principal at end of 10years 540000RateInterest rate in sinking fund account6NperNumber of years of deposit10PMTLevel deposit at end of each    See Answer
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