Rodrigo is attending a 4-year college. As a freshman, he was approved for a 10-year, federal unsubsidized student loan in the amount of $5,300 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 period, interest will accrue at 4.29%.
a. How much interest will Rodrigo accrue during the 4.5-year nonpayment period?
b. If Rodrigo 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 Rodrigo 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?
d. Rodrigo made his last monthly interest-only payment on July 8. His next payment is due on August 8. What will be the amount of that interest-only payment?