Question

You have an outstanding student loan with required payments of $ 500 per month for the next four years. The interest rate on the loan is 8%APR​ (compounded monthly). Now that you realize your best investment is to prepay your student​ loan, you decide to prepay as much as you can each month. Looking at your​ budget, you can afford to pay an extra $ 250 a month in addition to your required monthly payments of$ 500 ​,or $750 in total each month. How long will it take you to pay off the ​loan? ​(Note: Be careful not to round any intermediate steps less than six decimal​ places.)

The number of months to pay off the loan is_ (round to two decimal places.)

nothing.

​ (Round to two decimal​ places.)

Answer 1

Monthly Payment on student loan is $500 and he has 4 year remains in repayment and annual percentage rate is 8%. Current outstanding value of loan would be present value of next 4 year payment at 8% annual discount rate.

So, Current outstanding value of loan is calculated in excel and screen shot provided below:

Current outstanding value of loan is $20,480.96.

Now, He wants to repay $750 per month. So, number of month it will take to repay full amount is calculated in exceland screen shot provided below:

it will take 30.24 month to repay full amount.