Barbara borrows $3000. She agrees to make monthly interest payments on the loan and will build up a sinking fund with monthly deposits to repay the principal with a single payment 19 months from now. If the interest being charged on the loan is j12 = 8.5% and the interest being earned on the sinking fund is j12 = 5.4%, what is the monthly cost of the debt for Barbara?
Loan amount | 3000 |
Interst rate | 8.50% |
Monthly rate | 0.7083% |
Monthly interst payment | 21.25 |
Future Amount of Sinking Fund | 3000 |
Interst rate | 5.40% |
Monthly rate (i/12) | 0.45% |
Future value of Annuity is calculated as follows | |
FV=P*((1+r)^n-1/r) | |
FV= future value=3000 | |
P=periodic payment | |
r= rate of interest | |
n= number of payments | |
3000=p*((1+0.0045)^19-1/0.0045) | |
3000=p*(1.089053-1/0.0045) | |
P=3000/19.78948 | |
p=151.5957 | |
Monthly cost =21.25+151.5957 | |
$ 172.85 | |
Barbara borrows $3000. She agrees to make monthly interest payments on the loan and will build...
Barbara borrows $3500. She agrees to make monthly interest payments on the loan and will build up a sinking fund with monthly deposits to repay the principal with a single payment 21 months from now. If the interest being charged on the loan is j12 = 8% and the interest being earned on the sinking fund is j12= 5.2%, what is the monthly cost of the debt for Barbara? I got 182.95 but is wrong. please help
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