A loan of 1,000,000 is to be repaid by ten annual payments beginning one year after the loan is made. The lender wants annual payments of interest at a rate of 12% and repayment of the principal in a single lump sum at the end of 10 years. The borrower can accumulate the principal in a sinking fund earning an annual interest rate of 10%, and decides to do this by means of 10 level deposits starting one year after the loan is made.** (a) Calculate the interest payment that is paid annually to service the loan. (b) Calculate the sinking fund payment made annually. (c) Calculate the amount in the sinking fund immediately after the deposit made at the end of 5 years. (d) Create the sinking fund schedule for the loan.

A loan of 1,000,000 is to be repaid by ten annual payments beginning one year after the loan is made. The lender wants annual payments of interest at a rate of 12% and repayment of the principal in a single lump sum at the end of 10 years. The borrower can accumulate the principal in a sinking fund earning an annual interest rate of 10%, and decides to do this by means of 10 level deposits starting one year after the loan is made.** (a) Calculate the interest payment that is paid annually to service the loan. (b) Calculate the sinking fund payment made annually. (c) Calculate the amount in the sinking fund immediately after the deposit made at the end of 5 years. (d) Create the sinking fund schedule for the loan.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 16P

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