She also agrees to make annual level deposits into a

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Bob and Barbara are friends. Bob takes out a $10,000 loan and agrees to repay it over twelve years by making annual equally sized (level) payments at an effective rate of 5.62499%. At the same time, Barbara takes out a $10,000 loan and agrees to repay it by making annual interest payments at an annual effective interest rate of i. She also agrees to make annual level deposits into a sinking fund that earns 4% annual effective interest so as to accumulate $10,000 at the end of the twelve years. Bob and Barbara discover they have the same total annual expenditures resulting from their loans. Find the rate i.

Reference no: EM13641099

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