Principal is accumulated by making level annual payments

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Susan borrows 100,000. She has 2 repayment options: a. Level monthly payments at the end of each month for 30 years at a nominal interest rate of 12% convertible monthly b. Monthly interest payments to the lender at the end of each month for 15 years at a nominal interest rate of 12% convertible monthly. Principal is to be accumulated by making level annual payments at the end of each year for 15 years into a sinking fund earning interest at an annual effective rate i. The total payments under option b are 125,000 less than the total payments under option a. Calculate i. (A) 5.53% (B) 5.63% (C) 5.73% (D) 5.83% (E) 5.93%

Reference no: EM131085588

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