Question
Sam is attending a 4-year college. As a freshman, he was approved for a 10-year, federal unsubsidized student loan in the amount of $9,100 at
Sam is attending a 4-year college. As a freshman, he was approved for a 10-year, federal unsubsidized student loan in the amount of $9,100 at 4.29%. He knows he has the option of beginning repayment of the loan in 4.5 years. He also knows that during this non-payment period, interest will accrue at 4.29% (Note: Use 365 days in a year) a. How much interest will Sam accrue during the 4.5-year non-payment period?
b. If Sam decides to make no payments during the 4.5 years, the interest will be capitalized at the end of that period. What will the new principal be when he begins making loan payments, and how much interest will he pay over the life of the loan?
c. Suppose Sam only paid the interest during his 4 years in school and the 6-month grace period. What will he now pay in interest over the term of his loan?
SHOW WORK (thanks)
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