Question #$4$: Fixed$-$Payment Loan $[15$ Points$]$

You have calculated that in order to pay for your UC Merced education you will need borrow $$28,000$ in student loans. You take out a Stafford Loan that has an interest rate of $5\mathrm{.}5\%(i=0\mathrm{.}055.$ Assume that the payments on the loan are made yearly and are fixed. Upon graduation, Stafford loan gives you two repayment plans. You can make fixed annual payments over $10$ years or you can make fixed annual payments over $20$ years.

$($a$)$ What will be the annual fixed payments if you choose to pay off the loan in $10$ years? $[5$ Points$]$

$($b$)$ What will be the annual fixed payments if you choose to pay off the loan in $20$ years? $[5$ Points$]$

Page $2$ of $4$

$($c$)$ How much interest will you pay under the $10$ year plan? How much interest will you pay under the $20$ year plan? $[5$ Points$]$