Calculate the total annual cost of each bank loan

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Reference no: EM132063638

A company that needs to borrow $1000000 is offered different terms from 2 banks. Bank A expects the load to be amortized with annual payments at an annual interest rate of i=.08. Bank B requires annual interest payments at a rate of i=.06 and annual deposits into a sinking fund that earns interest at i=.02. In both cases the loan is to be paid off in 10 years.

Which bank is offering the better deal? Calculate the total annual cost of each bank's loan.

Reference no: EM132063638

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