Corporate finance

The Ampersand Corporation borrowed $2,500,000 from a group of private investors in order to finance an expansion of its manufacturing facilities. The investors will not receive any payments during the course of the loan, but under terms of the loan, the company must make quarterly payments into a sinking fund for 10 years.

a) If the loan interest rate is 12% compounded quarterly, how much will Ampersand have to accumulate in order to pay off its creditors at the end of 10 years?

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b) If the sinking fund earns 6.6% interest, how much will each of Ampersand’s quarterly payments have to be?

Frank has borrowed $12,349.16 at an interest rate of 14% compounded monthly for 17 months.

a) Calculate the amount needed to repay the loan using the given interest rate.

b) Find the equivalent annual rate for the given interest rate.

c) Calculate the amount needed to repay the loan using the equivalent annual rate.

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