A company has borrowed $225,000 at 13% compounded semi-annually to build an office complex. The loan agreement requires the payment of interest end of every year. In addition, the company is to make equal payments into a sinking fund so that the principal can be retired after fifteen (15) years. Interest earned by the fund is 11% compounded semi-annually.
What is the semi-annual interest payment on the debt?
What is the size of the semi-annual deposits into the sinking fund?
What is the total annual cost of the debt to the company?
What is the interest earned by the sinking fund in the 20th payment interval?
What is the balance of the fund after the 20th payment is made?
What is the book value of the debt after twelve (12) years?