You graduated from college after 4 long years and studying finally paid off! You

Question

You graduated from college after 4 long years and studying finally paid off! You find a nice engineering job with a very competitive package.But being in college for 4 years and pulling out student loans, you are in debt for $ 30,000.Since you have a good job, you decided to get ride of your student loan debt in 36 months debt in $ . You decided to pay off the debt by making a payment of $ 700 at the end off first month and gradually increase the principals by G( you pay $ 700+G at month 2, $700+2G, at month 3 $700+3G and so on). Assuming an interest rate of i=0.5 % per month. Find the value G. Draw the cash flow diagram and show your work

Explanation / Answer

Interest = 0.5 * 30000 = 150 $/ month So for 36 months total amount to be paid = 150. 36 + 30000 = 35400 $ Now 700* 36 + (G + 2G. ....+ 35G) = 35400 So G = 10200/630 = 16.19 $

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