Question

Angelica Reardon received a 4-year non-subsidized student loan of $17,000 at an annual interest rate of 6.1%. What are Angelica's monthly loan payments for this loan after she graduates in 4 years? (Round your answer to the nearest cent.) $

Answer 1

The formula used to calculate the fixed monthly payment ( $ P) required to fully amortize a loan of $ L over a term of n months at a monthly interest rate of r is

P = L[r(1 + r)ⁿ]/[(1 + r)ⁿ - 1].

Here, L = 17000, n = 4*12 = 48 and r = 6.1/1200.

Therefore, P = 17000*(6.1/1200) *[ (1+6.1/1200)⁴⁸ ]/[ (1+6.1/1200)⁴⁸ -1] = (1037/12)* 1.2755557/0.2755557 = $ 400.03( on rounding off to the nearest cent).

Thus, Angelica's monthly loan payments for a 4-year non-subsidized student loan of $17,000 at an annual interest rate of 6.1% is $ 400.03.