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How much interest will be earned in the sinking fund

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Reference no: EM133055938

A loan bears interest at 0/0 per annum effective, the interest being payable at the end of each year. The loan is repayable by means of a sinking fund in 10 years. The sinking fund deposits will be made at the end of each year. The sinking fund yields an effective interest rate of 5% per annum for the first five years and 2.5% per annum thereafter. If the amount of loan is $100,000, find the amount of annual outlay. How much interest will be earned in the sinking fund for the 7th year?

Reference no: EM133055938

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