Student borrowers now have more options to choose from when selecting repayment plans. The ‘Standard’ plan repays the loan up to 10 years with equal monthly payments. The ‘Extended’ plan allows up to 25 years to repay the loan. Assume that a student borrows $55,000 at 4.66% interest compounded monthly. (Source: U.S. Ministry of Education)
Construct an Amortization Schedule under the ‘Standard’ plan over 10 years
((a)
(i) Find the monthly payment
(ii) What is the total interest paid over the 10 years
(iii) How much of the 5th payment is used to reduce the loan?
(b) Construct an Amortization Schedule under the ‘Extended’ plan over 25 years
(i) Find the monthly payment
(ii) What is the total interest paid over the 25 years
(iii) How much of the 5th payment is used to reduce the loan?