Reference no: EM133047798

Question - You are borrowing money from the bank to fund your one-year MPS in management (accounting specialization) degree. You need $58,200 for tuition (paid on the first day) and $2,400 per month for room and board payable at the beginning of each month. The bank gives you $60,600 immediately as well as $2,400 on the first of each subsequent month for the room and board payments (for 11 additional months). The loan has an annual percentage rate of 4.80% compounded monthly. You can pay back at any time, but outstanding balances continue to grow at 4.80% APR with monthly compounding. After the 10-month program, you stay in Ithaca for two months to enjoy the summer and then begin working (i.e., twelve months after starting your degree), and only then do you start paying back the loan.

a) What is the outstanding balance on your debt when you begin working?

b) Your grandmother gives you $10,000 on the first day of work, which you use to immediately reduce the outstanding balance. Additionally, you decide to pay $1,500 at the end of every month until the loan is paid. How many months do you need to work in order to be debt free?

c) One year passes (after grandma gave you the money and you began working). After paying $1,500 at the end of every month for a year, you decided to get married and need to save up for the wedding. You discuss with your parents and they agree to help out with one year of payment. After that, no one will make any payment for the following two years. You will then resume making monthly payment (four years after you began working). You would like to re-evaluate your payment plan when you resume. How much do you need to pay every month if you would like to be debt-free 10 years after your graduation?