Question

You estimate that you will owe $40,200 in student loans by the time you graduate. If you want to have this debt paid in full within 10 years, how much must you pay each month if the interest rate is 4.35 percent, compounded monthly?A) $414.28 B) $411.09 C) $413.73 D) $442.50 E) $436.05

Answer 1

Answer:

$413.73

Explanation:

Here you want to find the monthly installment (payment) towards a student loan. We use the Time Value of Money techniques to find the missing parameter (PMT)  as follows :

PV = $40,200

P/YR = 12

N = 10 × 12 = 120

I = 4.35 %

FV = $ 0

PMT = ?

Using a financial calculator to enter the values as above, the monthly installment (payment) will be $413.73.