Question

Sandra will be transferring from a community college to a university in the fall. She has...

Sandra will be transferring from a community college to a university in the fall. She has calculated that she will need to take out a $35,500 loan for the three years she will spend at the university. She was able to secure a loan at 4.25% annual interest rate. While she is in school she does not plan on making any payments on her loan but interest will still be accruing over this time period. Answer the following questions.

(a) After three years what is the amount that Sandra will have to repay?

(b) If she plans on paying the loan off in 7 years after the 3 years spent in college how much should her monthly payment be?

(c) What was the total cost of the loan?

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Homework Answers

Answer #1

PART A -

Amount to be repaid after 3 years =

Amount to be repaid after 3 years =

Amount to be repaid after 3 years = $40,221.34

PART B -

CALCULATION OF MONTHLY INSTALLMENT

Where, Period = 7years * 12 months = 84periods

Rate of Interest = 0.0435/12months = 0.003541667 per month

Monthly Installment to be repaid for the loan = $554.42

PART C -

Total cost of the loan = (Monthly Installment * Number of periods) - Loan Amount

Total cost of the loan = ( $554.42 * 84 ) - $35,500

Total cost of the loan = $11,071.28

Incase of any doubt, please comment below. I would be happy to help.
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