A lender providing a loan of S5.5 million requires semi-annual payment of interest at a nominal rate of 7.9% p year, and repayment of the $5.5 million principal at the end of 8 years. The borrower plans to accumulate th principal for repayment at the end of 8 years using level semi-annual deposits into a sinking fund that earn interest at a nominal rate of 4% per year when compounded semiannually. What is the borrower's total cas outlay every 6 months?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Problem #6: A lender providing a loan of $5.5 million requires semi-annual payment of interest at a nominal rate of 7.9% per
year, and repayment of the $5.5 million principal at the end of 8 years. The borrower plans to accumulate that
principal for repayment at the end of 8 years using level semi-annual deposits into a sinking fund that earns
interest at a nominal rate of 4% per year when compounded semiannually. What is the borrower's total cash
outlay every 6 months?
Transcribed Image Text:Problem #6: A lender providing a loan of $5.5 million requires semi-annual payment of interest at a nominal rate of 7.9% per year, and repayment of the $5.5 million principal at the end of 8 years. The borrower plans to accumulate that principal for repayment at the end of 8 years using level semi-annual deposits into a sinking fund that earns interest at a nominal rate of 4% per year when compounded semiannually. What is the borrower's total cash outlay every 6 months?
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