A company borrows $140000, which will be paid back to the lender in one payment
ID: 3009016 • Letter: A
Question
A company borrows $140000, which will be paid back to the lender in one payment at the end of 6 years. The company agrees to pay yearly interest payments at the nominal annual rate of 5% compounded yearly. At the same time the company sets up a sinking fund in order to repay the loan at the end of 6 years. The sinking fund pays interest at an annual nominal interest rate of 6% compounded yearly. Find the total amount of the yearly payments, that is, the sum of the interest payment and the sinking fund payment. Total yearly payment = $
Explanation / Answer
A = P(1+rt)
A = 140000(1 + 0.05*6)
A = 140000( 1.3)
A = 182000
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