Question 21.32

2. Suppose that you need $30,000 for your last year of college. You could go to a private lending institution and apply for a signature student loan; rates range from 7% to 14%. However, your Aunt Sally is willing to lend you the money from her retirement savings, with no repayment until after graduation. All she asks is that in the meantime, you pay her each month the amount of interest that she would otherwise get on her savings (since she needs that to live on), which is 4%. What is your monthly payment to her, and how much interest will you pay her over the academic year (9 months)? (Aunt Sally will be glad to hear from you every month, anyway!)