Question

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?

Answer 1

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

Step-by-step explanation:

According to the question,

The largest amount unresolved after five years would have been:

=
`35000* ((F)/(P), 4 \ percent,5 )`

=
`35000* 1.216 7`

=
`42584.50`

Now,

time (t) will be:

=
`5* 12`

=
`60 \ monthly \ payments`

So, monthly payment will be:

=
`42582.85* ((A)/(P), 0.5 \ percent,60 )`

=
`42584.50* 0.0193`

=
`821.88`