Suppose a student loan has an interest rate of 5% compounded monthly with monthly payments and the borrower has 10 years to repay. If $9000 is borrowed, what are the monthly payments?
A) $95.46
B) $139.33
C) $169.53
D) $290.15

Question

Quizplus · Accepted Answer

The correct answer is A because the monthly payment can be calculated using the formula:PMT = (PV * r) / (1 - (1 + r)^(-n))where:PV is the present value of the loan ($9000)r is the monthly interest rate (5% / 12 = 0.05 / 12 = 0.004167)n is the number of months (10 years * 12 months/year = 120 months)Plugging in the values, we get:PMT = (9000 * 0.004167) / (1 - (1 + 0.004167)^(-120))PMT = $95.46

Suppose a Student Loan Has an Interest Rate of 5