Question

Gertrude takes out a $5,500 subsidized stafford loan, which must be paid back in ten years. 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, how much interest will she pay by the time the loan is repaid? round all dollar values to the nearest cent. a. $4,462.40 b. $1,213.28 c. $1,713.69 d. $2,094.80

Answer 1

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

What is compound interest?

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 r of in the time period of t.

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;

brainly.com/question/24274034