Compound interest is the amount charged on the principal amount and the accumulated interest with a fixed rate of interest for a time period.

The formula for the final amount with the compound interest formula can be given as,

$A=P\times\left(1+\dfrac{r}{n\times100}\right)^{nt}\\$

Here, A is the final amount (principal plus interest amount) on the principal amount P of with the rate<em> r </em>of in the time period of <em>t.</em>

Gertrude will graduate four years after taking out the loan. if the loan has an interest rate of 6.8%, compounded monthly, and Gertrude makes monthly payments.

Put the values in the above formula as,

$5500=P_{mt}\times\left(1-\dfrac{6.8}{12\times100}\right)^{-12\times10}\\P_{mt}=63.29$

In the 10 years, the refund she gets,

$A_r=63.29\times12\times100\\A_r=7594.8$

Interest paid by her is,

$I=7594.8-5500\\I=2094.8$

Thus, the total amount of interest will Gertrude pay by the time the subsidized Stafford loan is repaid is $2094.80.

Learn more about the compound interest here;

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2 years ago