Amortization method with equal annual payments

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Reference no: EM131969694

A 20-year loan of 20,000 may be repaid under one of two methods:

(i) Amortization method with equal annual payments at an e active rate of 6.5%;

(ii) Sinking fund method in which the lender receives an e ective rate of 8% and the sinking fund earns an annual e ective rate of j.

Both methods require a payment of X at the end of the each year for 20 years. Calculate j.

Reference no: EM131969694

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