If Rich decides to make no payments during the 4.5 years, the interest will be capitalized at the end of that period.
a. What will the new principal be when he begins making loan payments?
b. How much interest will he pay over the life of the loan?

Rich is attending a 4-year college. As a freshman, he was approved for a 10-year, federal unsubsidized student loan in the amount of $7,900 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 nonpayment time, interest will accrue at 4.29%.