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
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
<== 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.
<== 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
Note: Remember, this is a monthly rate. 'v' is the MONTHLY rate of discount.
or
Solve for 'P' and you nearly are done.
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.
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