Suppose you have the following three student loans: $11,000 with an APR of 6.5%

Question

Suppose you have the following three student loans: $11,000 with an APR of 6.5% for 17 years, S17,000 with an APR of 7% for 22 years, and $14,500 with an APR of 8% for 12 years. a. Calculate the monthly payment for each loan individually. b. Calculate the total you'll pay in payments during the life of all three loans. c. A bank offers to consolidate your three loans into a single loan with an APR of 7% and a loan term of 22 years. What will your monthly payments be in that case? What will your total payments be over the 22 years? a. The monthly payment of the $11,000 loan is $ 89.22. (Do not round until the final answer. Then round to the nearest cent as needed.) The monthly payment of the $17,000 loan is $ 126.38. (Do not round until the final answer. Then round to the nearest cent as needed.) The monthly payment of the $14,500 loan is $ 156.96. (Do not round until the final answer. Then round to the nearest cent as needed.) b. The total you'll pay in payments during the life of all three loans is $ 74167.44. (Round to the nearest cent as needed.) c. The monthly payment of the consolidated loan is $ .(Do not round until the final answer. Then round to the nearest cent as needed.)

Explanation / Answer

C)

Answer :-

Total consolidated loan amount (11,000$+17,000$+14,500$)=42,500$

Total amount of loan to be oustanding after 22 yrs = Present value*(1+R/100)n

=42500*(1+7/100)22

=42500*4.43040

=188292

For 22 yrs overall oustanding loan will be 188292 $

then for each month will be = 188292 $ / (22yrs*12months)

=713.2276$

Note : Assuming that the loan will be compounded yearly and interest is repaid in monthly including principal portion of loan .eventhough the loan is 22yrs terms the loan is fully paid at the end of 7th year only.

Period Amount 1+R/100 Amount*(1+R/100) Repayment Balance loan oustanding 1 42,500 1.07 45475 8558.73 36916 2 36916.27 1.07 39500 8558.73 30942 3 30941.6789 1.07 33108 8558.73 24549 4 24548.86642 1.07 26267 8558.73 17709 5 17708.55707 1.07 18948 8558.73 10389 6 10389.42607 1.07 11117 8558.73 2558 7 2557.955892 1.07 2737 2737.00 0

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