Consider John Smith, a new freshman who has just received astudy loan and started college. He plans to obtain the maximum loanat the beginning of each year. Although John Smith does not have tomake any payments while he is still in school, the 6.5 percentinterest per year compounded monthly owed accrued and is added tothe balance of the loan.
Study Loan Limits |
Freshman | $26,250 |
Sophomore | $35,000 |
Junior | $55,000 |
Senior | $55,000 |
After graduation, John Smith gets a six-month grace period. Thismeans that monthly payments are still not required, but interest isstill accruing. After the grace period, the standard repayment planis to amortize the debt using monthly payments for 10 years.
Required:
Using the standard repayment plan and a 6.8 percent APR interestrate, compute the monthly payments John Smith owes after the graceperiod.
