Example. A loan of $100,000 is to be repaid by 10 annual payments beginning one year after the loan is made. The lender wants annual payments of only interest at a rate of 10% and repayment of the principal in a single lump sum at the end of 10 years. The borrower can accumulate the principal in a sinking fund earning an annual interest of 8%, and decides to do this by means of 10 level deposits starting one year after the loan is made. (a) Find the homeowners' total annual outlay and compare this to the level annual payment required by the amortization method at 10%. Find the annual rate of interest i′ for which the amortization method at rate i results in the same annual outlay as the borrower pays in the sinking fund method in this example. (b) Supppose the lender's rate is 8% and the sinking rate is 10%. Repeat part (a), comparing this to the amortization method at 8%