Question

You borrow $10,000 for educational expenses (ie, a student loan). Six months after graduation you need to start making monthly payments on your loan. If the loan repayment period is 10 years and the APR is 4.9%, how much total interest will you pay over the 10 years

Answer 1

Answer:

total interest paid over 10 year = $2669

Step-by-step explanation:

given data

borrow = $10,000

time period = 10 year

APR = 4.9%

solution

we know here for compounding no of period will be

no of period = 10 × 12 = 120

so interest rate per period will be

interest rate per period = $\frac{0.0490}{12}$ = 0.41 %

so monthly payment will be as

monthly payment = $\frac{principal \times rate \times (1+r)^t}{(1+r)^t - 1}$   ......1

monthly payment = $\frac{10000 \times 0.041 \times (1+0.041)^{120}}{(1+0.041)^{120} - 1}$    

monthly payment = 105.58

so total installment will be

total installment = 120 × 105.58  = $12669.6

so total interest paid over 10 year is = $12669.6 - $10000

total interest paid over 10 year = $2669