charged at 5% compounded semi-annually, a sinking fund is created at a rate of 6% compounded semi-annually. Find: a) the semi-annual cost by the sinking fund method; a) the semi-annual cost by amortization; c) Did the borrower made the right decision in setting up a sinking fund? Justify yo answer.

charged at 5% compounded semi-annually, a sinking fund is created at a rate of 6% compounded semi-annually. Find: a) the semi-annual cost by the sinking fund method; a) the semi-annual cost by amortization; c) Did the borrower made the right decision in setting up a sinking fund? Justify yo answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A debt of ? 250,000 is to be repaid after 5 years. If the interest is charged at 5%
compounded semi-annually, a sinking fund is created at a rate of 6%
compounded semi-annually.
Find: a) the semi-annual cost by the sinking fund method;
a) the semi-annual cost by amortization;
c) Did the borrower made the right decision in setting up a sinking fund? Justify your
answer.

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