You estimate that you will owe $40,200 in student loans by the time you graduate. If you want to have this debt paid in full within 10 years, how much must you pay each month if the interest rate is 4.35 percent, compounded monthly?

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Quizplus · Accepted Answer

To find the monthly payment for a loan with compound interest, you can use the loan payment formula: $PMT = P \times \frac{r(1+r)^n}{(1+r)^n - 1}$, where PMT is the monthly payment, P is the principal amount ($40,200), r is the monthly interest rate (annual rate divided by 12 months, so 4.35% or 0.0435 divided by 12), and n is the total number of payments (10 years times 12 months = 120 payments). Plugging in the values: $PMT = 40200 \times \frac{0.0435/12(1+0.0435/12)^{120}}{(1+0.0435/12)^{120} - 1}$, calculating this gives a monthly payment of approximately $413.73.

You Estimate That You Will Owe $40,200 in Student Loans