This problem is a complex financial problem that requires several skills, perhap

Question

This problem is a complex financial problem that requires several skills, perhaps some from previous sections.

During four years of college, Nolan MacGregor's student loans are $4000, $3500, $4400, and $5000 for freshman year through senior year, respectively. Each loan amount gathers interest of 1.2%, compounded quarterly, while Nolan is in school and 3.6%, compounded quarterly, during a 6-month grace period after graduation.

(a) What is the loan balance after the grace period? Assume the freshman year loan earns 1.2% interest for 3/4 year during the first year, then for 3 full years until graduation. Make similar assumptions for the loans for the other years. (Round your answer to the nearest cent.)
$  

(b) After the grace period, the loan is amortized over the next 10 years at 3.6%, compounded quarterly. Find the quarterly payment. (Round your answer to the nearest cent.)
$  

(c) If Nolan decides to pay an additional $90 per payment, how many payments will amortize the debt? (Round your answer up to the next whole number.)
quarters

(d) How much will Nolan save by paying the extra $90 with the number of payments from part (c)? (Round your answer to the nearest cent.)
$

Explanation / Answer

a. Loan Value at the end of Grace period will be $17.652.96

b. Quarterly payment: $442.12

Use any financial calculator and input values as below

c. 33 payments will amortize the debt

d. Total Saving if $90 is paid extra will be $124.84.

Year 1 Loan Year 2 Loan Year 3 Loan Year 4 Loan Total 4000 3500 4400 5000 Quarterly Interest 0.003 0.003 0.003 0.003 No.of quarters 15 11 7 3 Future Value at the end of 4th Year (FV formula in Excel) ($4,183.83) ($3,617.25) ($4,493.24) ($5,045.14) ($17,339.45) Quarterly Interest in Grace period 0.009 No.of Quarters 2 FV at the end of Grace Period $17,652.96

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