John has just graduated from State University. He owes $35,000 in college loans, but he does not have a job yet. The college loan company has agreed to give John a break on a deferred-payment plan that works as follows. John will not have to repay his loan for 5 years. During this “grace period” the loan obligation will compound at 4% per year. For the next 5 years, a monthly payment will be required, and the interest rate will be 0.5% per month. What will be John’s monthly payment over the 60-month repayment period?

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SerenaBochenek SerenaBochenek · Answer 1 · 2020-12-11T11:18:53+01:00

Answer:

The correct response is "821.88". A further explanation is given below.

Explanation:

According to the question,

The largest amount unresolved after five years would have been:

= [tex]35000\times (\frac{F}{P}, 4 \ percent,5 )[/tex]

= [tex]35000\times 1.216 7[/tex]

= [tex]42584.50[/tex]

Now,

time (t) will be:

= [tex]5\times 12[/tex]

= [tex]60 \ monthly \ payments[/tex]

So, monthly payment will be:

= [tex]42582.85\times (\frac{A}{P}, 0.5 \ percent,60 )[/tex]

= [tex]42584.50\times 0.0193[/tex]

= [tex]821.88[/tex]