Question

Alan has borrowed $10,000 on which interest is charged at 10% effective annually. Alan is accumulating a sinking fund at 8% effective annually to repay the loan. At the end of 10 years the balance in the sinking fund is $5,000. At the end of the 11th year Alan makes a total payment of $1,500. a) How much of the $1,500 pays interest currently on the loan? b) How much of the $1,500 goes into the sinking fund? c) What is the sinking fund balance at the end of the 11th year?

Name: alan has borrowed 10000 on which interest is charged at 10 effective annually alan is accumulating a sinking fund at 8 effective annually to repay the loan at the end of 10 years the balance 31403
Uploaded: 2023-07-24T10:25:23-08:00
Duration: 5 min 35 s
Channel: Madhur L
Description: alan has borrowed 10000 on which interest is charged at 10 effective annually alan is accumulating a sinking fund at 8 effective annually to repay the loan at the end of 10 years the balance 31403

          Alan has borrowed $10,000 on which interest is charged at 10%
effective annually. Alan is accumulating a sinking fund at 8%
effective annually to repay the loan. At the end of 10 years the
balance in the sinking fund is $5,000. At the end of the 11th year
Alan makes a total payment of $1,500. 
a) How much of the $1,500 pays interest currently on the
loan?
b) How much of the $1,500 goes into the sinking fund?
c) What is the sinking fund balance at the end of the 11th
year?

Added by Julia B.

Calculus: Early Transcendentals

James Stewart 8th Edition

Instant Answer

Solved by Expert Madhur L

07/24/2023

Step 1

To convert this to an annual nominal rate, we use the formula: nominal rate = (1 + effective rate)^(1/n) - 1 where n is the number of compounding periods per year. In this case, n = 1 since the interest is charged annually. Therefore, the nominal rate Show more…

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Alan has borrowed $10,000 on which interest is charged at 10% effective annually. Alan is accumulating a sinking fund at 8% effective annually to repay the loan. At the end of 10 years the balance in the sinking fund is $5,000. At the end of the 11th year Alan makes a total payment of $1,500. a) How much of the $1,500 pays interest currently on the loan? b) How much of the $1,500 goes into the sinking fund? c) What is the sinking fund balance at the end of the 11th year?