Question

Alex just started college and has taken a 10-year subsidized loan out for $5,500 with 6.5% deferred interest. He plans on graduating in 4 years. Determine the money payment alex will pay upon graduation.

Answer 1

Given that the 6.5% interest on the $5,500 loan is deferred during college, the amount Alex will pay upon graduation is $81.67 monthly.

How can the amount Alex will pay be found?

The number of years for the loan = 10-year

The loan amount = $5,500

The number of years for the interest = 6 years

The monthly payment formula is presented as follows;

$a = \frac{p \times \frac{r}{12} \times {(1 + \frac{r}{12} )}^{84} }{({1 + \frac{r}{12} )}^{84} - 1}$

Which gives;

$a = \frac{5500 \times \frac{0.065}{12} {(1 + \frac{0.065}{12} })^{84} }{{(1 + \frac{0.065}{12} })^{84}} = 81.67$

• The amount Alex will pay upon graduation is $81.67 each month

Learn more about monthly payment on loan formula;

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