Laura borrows 3,000 for 10 years at 13% annual effective rate of interest. She pays interest annually and accumulates 3,000 in two sinking funds by making annual deposits. One third of the loan is accumulated in a sinking fund earning 16% and the other two-thirds in a sinking fund earning 11%.
(a) Find Laura's total annual payment.
(b) Redo (a) assuming that Laura deposits one-third of her total sinking fund deposit needed to accumulate 3,000 in 10 years in the 16% fund and two-thirds into the 11% fund.
(c) Find the total cost of of the loan under the two options.