Student Loan ProgramThe National Direct Student Loan (NDSL) program allows collegestudents to borrow funds...Student...

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Accounting

Student Loan Program
The National Direct Student Loan (NDSL) program allows collegestudents to borrow funds from the federal government. The contractstipulates that the annual percentage rate of interest is 0 percentuntil 12 months after the student ceases his or her formaleducation (defined as as least half-time enrollment). At that time,interest becomes 4 percent per year. The maximum repayment collegeperiod is 10 years. Assume that the student borrows $10,000 in thebeginning of the first year of college and completes his or hereducation in four years. Loan repayments begin one year aftergraduation.
Required:
A. Assuming that the student elects the maximum payment period,what are the uniform annual loan repayments? (Assume all repaymentsoccur at the end of the year)
B. If the rate of interest on savings deposits is 6 percent,what is the minimum amount the student has to have in a bankaccount one year after graduation to make the loan paymentscalculated in part (a)?
C. Are recipients of the NDSL program receiving a subsidy? Ifso, what is the present value of the subsidy when the loan is takenout?

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AnswerA Assuming that the student elects the maximum paymentperiod what are the uniform annual loan repaymentsAnnuity factor 1 1 r 10 r r 4 004 t 10 years 1 1 004 10 004 81108Annuity See Answer

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In: AccountingStudent Loan ProgramThe National Direct Student Loan (NDSL) program allows collegestudents to borrow funds...Student Loan ProgramThe National Direct Student Loan (NDSL) program allows collegestudents to borrow funds from the federal government. The contractstipulates that the annual percentage rate of interest is 0 percentuntil 12 months after the student ceases his or her formaleducation (defined as as least half-time enrollment). At that time,interest becomes 4 percent per year. The maximum repayment collegeperiod is 10 years. Assume that the student borrows $10,000 in thebeginning of the first year of college and completes his or hereducation in four years. Loan repayments begin one year aftergraduation.Required:A. Assuming that the student elects the maximum payment period,what are the uniform annual loan repayments? (Assume all repaymentsoccur at the end of the year)B. If the rate of interest on savings deposits is 6 percent,what is the minimum amount the student has to have in a bankaccount one year after graduation to make the loan paymentscalculated in part (a)?C. Are recipients of the NDSL program receiving a subsidy? Ifso, what is the present value of the subsidy when the loan is takenout?