Question

"Today you made a student loan of $10,000 with the 5.5% annual interest rate. You will be in school next four years and you do not have any obligation to make payments until you graduate while the interest accumulates. How much will you owe in four years when you start making payments?"

Answer 1

Answer:

$12,388.25

Explanation:

The computation of the amount owed is shown below:

= Today value × (1 + annual rate of interest)^given number of years

where,

Today value = $10,000

Annual interest rate = 5.5%

Number of years = 4

Now placing the values

So, the amount owed equal to  

= $10,000 × (1 + 0.055)^4

= $10,000 × 1.2388246506

= $12,388.25