Interest at 8% on a loan of $2000 is paid annually as it falls due. A sinking fund is established at 5% to enable the borrower to repay the loan at the end of 8 years.
Eight equal annual payments will be made to the sinking fund, one at the end of each of the 8 years.
a) Find the sinking fund deposit;
b) Find the net outstanding balance on the loan at time 5 immediately after the 5th outlay (including annual sinking deposit and interest due).