Annual effective rate on the sinking fund

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Quetzalcoatl and Tonantzin each take out a 17-year loan of $L. Quetzalcoatl repays his loan using the amortization method, at an annual effective rate of i. He makes an annual payment of $500 at the end of each year. Tonantzin repays her loan using the sinking fund method. She pays interest annually, also at an annual effective interest rate of i. In addition, Tonantzin makes level annual deposits at the end of each year for 17 years into a sinking fund. The annual effective rate on the sinking fund is 4.62%, and she pays off the loan after 17 years. Tonantzin’s total payment each year is equal to 10% of the original loan amount. Calculate L.

Reference no: EM13722994

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