Reference no: EM132555948

Consider John Smith, a new freshman who has just received a study loan and started college. He plans to obtain the maximum loan at the beginning of each year. Although John Smith does not have to make any payments while he is still in school, the 6.5 percent interest per year compounded monthly owed accrued and is added to the balance of the loan.

Study Loan Limits

Freshman                  $26,250

Sophomore                $35,000

Junior                        $55,000

Senior                           $55,000

After graduation, John Smith gets a six-month grace period. This means that monthly payments are still not required, but interest is still accruing. After the grace period, the standard repayment plan is to amortize the debt using monthly payments for 10 years.

Required:

Question 1: Using the standard repayment plan and a 6.8 percent APR interest rate, compute the monthly payments John Smith owes after the grace period.