Lucas borrows $4300 for 11 years. He can repay the loan using the following two methods:
(i) amortization method with equal annual payments of R at an annual effective interest of 6%.
(ii) sinking fund method in which the lender receives an annual effective rate of 7.12% and the sinking fund earns an annual effective rate of jj.
If both methods require the same total annual payment R to be made at the end of each year for 11 years, calculate jj.
st: Under the amortization method, the annual payment is R=
2nd: Under the SF method, the annual interest payment is I=
3rd: The sinking fund deposit is D=
4th: The sinking fund annual effective rate is j=