1. **State the problem:** Jo has a student loan of $87941 with an interest rate of prime + 2.5%. The prime rate is 3.5%, so the total interest rate is $3.5\% + 2.5\% = 6\%$ annually. Jo does not make payments during the 6-month grace period, and the interest accrued during this time is added to the principal. Jo then makes 4 fixed monthly payments of $1400 each. We need to calculate: - Total interest charged during the 6-month grace period. - Total interest charged during the first 4 payments. 2. **Calculate the interest rate and monthly interest rate:** Annual interest rate $r = 6\% = 0.06$ Monthly interest rate $i = \frac{0.06}{12} = 0.005$ 3. **Calculate interest during the grace period:** Interest for 6 months on $87941$ with no payments: $$\text{Interest} = P \times r \times t = 87941 \times 0.06 \times \frac{6}{12} = 87941 \times 0.03 = 2638.23$$ So, the interest added to the principal after grace period is $2638.23$. 4. **Calculate new principal after grace period:** $$P_{new} = 87941 + 2638.23 = 90579.23$$ 5. **Calculate interest and principal payments for the first 4 months:** We calculate interest each month on the current principal, subtract payment, and update principal. Month 1: Interest = $90579.23 \times 0.005 = 452.90$ Principal paid = $1400 - 452.90 = 947.10$ New principal = $90579.23 - 947.10 = 89632.13$ Month 2: Interest = $89632.13 \times 0.005 = 448.16$ Principal paid = $1400 - 448.16 = 951.84$ New principal = $89632.13 - 951.84 = 88680.29$ Month 3: Interest = $88680.29 \times 0.005 = 443.40$ Principal paid = $1400 - 443.40 = 956.60$ New principal = $88680.29 - 956.60 = 87723.69$ Month 4: Interest = $87723.69 \times 0.005 = 438.62$ Principal paid = $1400 - 438.62 = 961.38$ New principal = $87723.69 - 961.38 = 86762.31$ 6. **Calculate total interest charged during first 4 payments:** Sum of monthly interests: $$452.90 + 448.16 + 443.40 + 438.62 = 1783.08$$ **Final answers:** - Total interest during grace period = $2638.23$ - Total interest during first 4 payments = $1783.08$