Question

note: please make sure to properly format your answers. all dollar figures in the answers need to include the dollar sign and any amount over 1,000 should include the comma ($32,354.67). all percentage values in the answers need to include a percentage sign (%). for all items without specific rounding instructions, round your answers to two decimal places, show both decimal places (5.00).
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 non - payment time, interest will accrue at 4.29%.
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? $9,425.10
b. how much interest will he pay over the life of the loan?

Explanation:

Step1: Identify the loan details

Principal amount \( P = \$7,900 \), annual interest rate \( r = 4.29\% = 0.0429 \), time period \( t = 4.5 \) years.

Step2: Calculate simple interest

The formula for simple interest is \( I = P \times r \times t \).
Substitute the values: \( I = 7900 \times 0.0429 \times 4.5 \).

First, calculate \( 7900 \times 0.0429 \): \( 7900 \times 0.0429 = 338.91 \).

Then, multiply by 4.5: \( 338.91 \times 4.5 = 1525.095 \approx 1525.10 \).

Answer:

\$1,525.10