10.3.6: Consider a $21,281.27 loan for 7 years at 8% interest compounded
quarterly and a payment of $1000 per quarter-year.

(a) Compute the unpaid balance after 5 years.

(b) How much interest is paid during the fifth year ?

(c) How much principal is repaid in the first payment?

(d) What is the total amount of interest paid on the loan?

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10.3.12: A loan of $105,504.50 is to be amortized over a 5 year term at 12%
interest compounded monthly with monthly payments and a $10,000 balloon
payment at the end of the term. Calculate the monthly payment.


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A sinking fund is a pool of money accumulated by a corporation or government
to repay a specific debt at some future date.

10.3.28: A corporation sets up a sinking fund to replace an aging warehouse.
The cost of the warehouse today would be $8 million. However, the corporation
plans to replace the warehouse in 5 years. It estimates that the cost of
the warehouse will increase by 10% annually. The shrinking fund will earn
12% interest compounded monthly. What should be the monthly payments for
the sinking fund?