You have graduated from college but unfortunately have $35,000 in outstanding lo

Question

You have graduated from college but unfortunately have $35,000 in outstanding loans. The loans require monthly payments of $3,695, which covers interest and principal repayment (that is, the loan has the same basic features as a mortgage). If the interest rate is 3 percent, how long will it take you to repay the debt? Use Appendix D to answer the question. Round your answer up to the next whole number. If the powers that be raise the rate to 6 percent, how many additional years will be required to retire the loans? Use Appendix D to answer the question. Round your answer up to the next whole number.

Explanation / Answer

Assuming the rate given of 3% and 6% to be annual and not monthly

1.

Present value of annuity factor for 35000/3695=9.4722 at 3%/12=0.25% corresponds to 9.5981 months

Hencr, it will take 10 months

2.

Present value of annuity factor for 35000/3695=9.4722 at 6%/12=0.5% corresponds to 9.728 months

Hence, it will take 10 months

So, it will take 0 additional years

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.