Suppose you have the following three student loans: $13,000 with an APR of 8.5%
ID: 3047197 • Letter: S
Question
Suppose you have the following three student loans:
$13,000
with an APR of
8.5%
for
15
years,
$15,000
with an APR of
9%
for
20
years, and
$14,500
with an APR of
10%
for
10
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.
9%
20
20
a. The monthly payment of the
$13,000
loan is
$nothing.
(Do not round until the final answer. Then round to the nearest cent as needed.)
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 of9%
and a loan term of20
years. What will your monthly payments be in that case? What will your total payments be over the20
years?Explanation / Answer
a. Calculate the monthly payment for each loan individually.
The monthly payment of the $13,000 loan is
EMI = [P x R x (1+R)N]/[(1+R)N-1] = [13000 * (0.085/1200) * (1 + 0.085/1200)180]/ [(1 + 0.085/1200)180 -1]
EMI = $ 128.02
The monthly payment of the $13,000 loan is ; APR = 8.5% , Time = 15 years
EMI = [P x R x (1+R)N]/[(1+R)N-1] = [13000 * (0.085/1200) * (1 + 0.085/1200)180]/ [(1 + 0.085/1200)180 -1]
EMI = $ 128.02
Total payments = $ 128.02 * 180 = $ 23043.60
The monthly payment of the $15,000 loan is ; APR =9% , Time = 20 years
EMI = [P x R x (1+R)N]/[(1+R)N-1] = [15000 * (0.09/1200) * (1 + 0.09/1200)240]/ [(1 + 0.09/1200)240 -1]
EMI = $ 134.96
Total payments = $ 134.96 * 240 = $ 32390.4
The monthly payment of the $14,500 loan is ; APR = 10% , Time = 10 years
EMI = [P x R x (1+R)N]/[(1+R)N-1] = [14500 * (0.10/1200) * (1 + 0.10/1200)120]/ [(1 + 0.10/1200)120 -1]
EMI = $ 191.62
Total payments = $ 191.62 * 120 = $ 22994.4
Total paymets of three loans = $ 23043.60 + $ 32390.40 + $ 22994.40 = $ 78428.40
c. Total loan amount in this case = $ 13000 + $ 14500 + $ 15000 = $ 42500
Loan term = 20 years = 240 months
APR = 9%
Monthly payment = [P x R x (1+R)N]/[(1+R)N-1] = [42500 * (0.09/1200) * (1 + 0.09/1200)240]/ [(1 + 0.09/1200)240 -1] = $ 382.38
Total payments over the 20 years = $ 382.38 * 240 = $ 91771.20
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