Question

Katrina has the option of an 8-year non-subsidized student loan of $32,000 at an annual interest rate of 3.5% or an 8-year subsidized loan of $32,000 at an annual interest rate of 4.5%. Determine for which loan Katrina will pay less interest over the term of the loan if she starts making payments 2 years after obtaining the loan. (Assume Katrina makes monthly payments for each loan. For each answer, enter a number. Round your answers to the nearest cent, as appropriate.)
The total interest paid (in dollars) on the non-subsidized loan is $ -------

The total interest paid (in dollars) on the subsidized loan is $ -------

Answer 1

Answer: katrina will pay less interest on the 8-year non subsidized student loan

The total interest paid on the non-subsidized loan is USD 8,959

The total interest paid on the subsidized loan is USD 11,520

Step-by-step explanation:

Subsidized loan at 4.5% for 8years will be 4.5/100 × 32000 x 1/12= USD120/month, USD 1440/year. For 8 years, USD11,520

For non subsidized student loan at 3.5% will be 3.5/100 x 32000x 1/12= USD 93.33/month, USD 1,119per year and USD 8,959 for 8 years