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How much more would the repayment approach cost

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To launch a new product line, a company borrowed $50,000 for 5 years at 4% compounded annually. It will be repaid all at once at the end of the term. The company will make quarterly payments into a sinking fund earning 3% interest compounded quarterly.

Problem a) How much money will the company have to repay in 5 years?

Problem b) How much money will each quarterly payment be?

Problem c) Instead of setting up a sinking fund, the company could just wait until the loan ends and repay the loan in one lump sum. How much more would this repayment approach cost the company?

Reference no: EM132743443

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