Bill owns $50,000 student loans, the interest rate is 6% per year, and he plans to pay it off in 5 equal anual payments.
The student loan is not subsidized, therefore bill has to pay any interest generated from now on. Since he is still in schoool, he will not make the first payment for two years (when he graduates). what is the payment amount assuming that he always makes the payment at the end of each year?
For unknown reason, Bill will skip the third payment (5 years from now). How will this affect his payment amount if he wants to still pay off the loan in 5 equal payments?
Hint: draw the cash flow diagram