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A $1000 loan is being repaid with level payments at the end of each year for...

A $1000 loan is being repaid with level payments at the end of each year for 4 years using a sinking fund method. The loan has 10% effective interest per year and the sinking fund has 8% interest per year. Create a sinking fund table for this payment plan. Include a column for the period, interest paid that period, sinking fund deposit that period, interest earned in the sinking fund that period and the balance in the sinking fund at the end of that period.

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Expert Solution

Payment Amount = loan Amount * (Interest on Loan - Interest on Sinking Fund + 1/PVAF(8%,4))

Payment Amount = 1000 * (10% - 8% + 1/3.3121)

Payment Amount = $321.92

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jeff jeffy answered 2 years ago
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