Sinking funds bleh! Since it has not been state I'm going to assume annual payments instead of teh standard monthly. So how a sinking fund works is a person borrows money but instead of making the regular payments on it, they only pay interest each year. In this problem 8% of $25000 is $2000. That means at the end of every year, he will pay the bank $2000 in interest and nothing towards the $25,000.
But Jack isn't going to wait till year 5 to just have $25,000 to pay back. He is going to go to a different bank and make deposits that will give him 6% interest.
So at this other bank he needs to accumulate $25,000 in 5 years at a 6% interest rate. If you have the formula for sn that will be helpful. It is basically 25,000 = X(1.065 - 1)/(.06), where X is the annual payment to Bank 2. When I compute I get 4434.91.
The question doesn't ask for it but sometimes it will ask for the total annual payment which would be $2000 + 4434.91 = 6434.91
