John borrows $10,000 for 10 years and uses a sinking fund to repay the principal. The sinking fund deposits earn an annual effective interest rate of 5%. The total required payment for both the interest and the sinking fund deposit made at the end of each year is $1,445.04. Calculate the annual effective interest rate charged on the loan.

John borrows $10,000 for 10 years and uses a sinking fund to repay the principal. The sinking fund deposits earn an annual effective interest rate of 5%. The total required payment for both the interest and the sinking fund deposit made at the end of each year is $1,445.04. Calculate the annual effective interest rate charged on the loan.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 12P

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