Suppose that you borrow $25,000 on September 1, 2006 and another $25,000 on September 1, 2007 to finance the portion of tuition and living expenses for graduate school for which your savings are insufficient. Repayment on each of these loans is deferred until graduation. However, interest of 6.5% (quoted annual percentage rate) begins accruing immediately (compounded monthly). The first payment is due September 1, 2008. The loan agreement specifies that the loan be repaid in 120 equal monthly installments.

a) What will be the total value of your indebtedness on August 31, 2008 after the accrual of interest during your time in school? [Assume interest for the last month has accrued but the payment has not yet been made].

b) What is the monthly payment?