W988AMMT.6
6.Let's say you have a student loan at an interest rate of 6%, compounded monthly. As long
as you're in school, you don't have to repay it. However, starting one month from
graduation, you have to start repaying it.
- Assume that your monthly payment will be 111.02 and you will have to make ten years of
payments. What is the present value of your loan payments today, 1.5 years before
graduation? (7 pts.)
- Imagine you have the opportunity to repay the loan in annual (instead of monthly)
installments over the same length of time. If the first payment is due 1 year after
graduation, would the payment amount be more or less than $1332.24? What if the first
payment were due on graduation day? WHY? Explain with words, not math. (6 pts.)
- If you make monthly payments and add $20 per month to your payment, how long will it
take to repay your loan? (5 pts.)
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