Huai takes out a $3200 student loan at 6.7% to help him with 2 years of community college. After finishing the 2 years, he transfers to a state university and borrows another $12,000 to defray expenses for the 5 semesters he needs to graduate. He graduates 4 years and 4 montgs after acquiring the first loan and payments are deferred for 3 months after graduation. The second loan was acquired 2 years after the first and has an interest rate of 7.3%. Find Huai's monthly payment when regular payments begin.

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Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.