A student receives a federally backed student loan of $600 at 3.5% interst compounded monthly. After fishing college in 2 years, the student must amortize the loan in the next 4 years by making equal monthly payments.what will the payments be and what total intersest will student pay?please help me! thanks • Oct 14th 2008, 05:49 AM TKHunny How many times have I said this? You MUST learn to use Basic Principles. Draw a map and reason it out. i = 3.5% = 0.035 $i^{(12)} = 0.035/12 = 0.00291666666...$ <== Monthly interest rate. Note: I'll just use 'i' in order to make the notation more convenient. Just remember this is the MONTHLY rates of interest. t = time in years t = 0 ==> 600.00 <== There's the loan. $t = 2 ==> 600.00 \cdot (1+i)^{24}$ <== There's the value after two years (24 months). Pull your Annuity Immediate formula out of your hat...(or learn to derive it!) P = Equal Monthly Payment $v = \frac{1}{1+i} = 0.997091815$ Note: Remember, this is a monthly rate. 'v' is the MONTHLY rate of discount. $600.00 \cdot (1+i)^{24} = P \frac{v - v^{49}}{1-v}$ or $600.00 \cdot (1+i)^{24} = P \frac{1 - v^{48}}{i}$ Solve for 'P' and you nearly are done. • Oct 14th 2008, 07:15 AM TKHunny In case you are wondering what "draw" means... Here is an example. Time Value of Money It's just a simple map to help you see when money moves and when it has what value. In your case, you have +$600 at t = 0 months and -\$P at each of months 25 - 72.