Question

You have $50,000 in student loans. You set up a plan to repay this debt with monthly payments over the next 15 years (so 180 total payments). Your first payment will be in one month, and you believe with raises at work that each payment can be 0.2% higher than the previous one (so, for example, if your first payment is $100, your second month payment would be $100.20). If your monthly interest rate on this loan is 0.4%, what will your first payment in one month be?

Answer 1

Repayment of the loan referred to in the problem is equivalent to a growing annuity with the present balance ans present value. First payment can be calculated using Excel work sheet. Screen shot of the work sheet with formula, cell references and values is appended below:

Hence the first payment required in one month is $331.60