Question

How much do you owe?

The average graduating college student has around $30,000 of debt at graduation. They usually must pay this off in 10 years at a nominal rate of 5%. The average starting salary for an engineer is $57,000. If you have this debt, answer the following questions.

Calculate the payment schedule and investigate the amounts you will pay in interest and on the principal. Be prepared to answer questions about your calculations and conclusions during the final.

Answer 1

Year	Beg Balance	Total Pmt	Interest	Principal Paid	End Balance
1	30,000	3,885.14	1,500.00	2,385.14	27,614.86
2	27,615	3,885.14	1,380.74	2,504.39	25,110.47
3	25,110	3,885.14	1,255.52	2,629.61	22,480.85
4	22,481	3,885.14	1,124.04	2,761.09	19,719.76
5	19,720	3,885.14	985.99	2,899.15	16,820.61
6	16,821	3,885.14	841.03	3,044.11	13,776.50
7	13,777	3,885.14	688.83	3,196.31	10,580.19
8	10,580	3,885.14	529.01	3,356.13	7,224.06
9	7,224	3,885.14	361.20	3,523.93	3,700.13
10	3,700	3,885.14	185.01	3,700.13	0.00

payment = 3885.14 (use PMT function in Excel)