Consider a student loan of $7,500 at a fixed APR of 9% for 4 years. a. Calculate

Question

Consider a student loan of $7,500 at a fixed APR of 9% for 4 years. a. Calculate the monthly payment b. Determine the total amount paid over the term of the loan. c. Of the total amount paid, what percentage is paid toward the principal and what percentage is paid for interest a. The monthly payment is $ (Do not round until the final answer. Then round to the nearest cent as needed) b. The total amount paid over the course of the loan is (Round to the nearest cent as needed.) of the total amount paid (Round to once decimal place as needed.) rd the principal and % is paid for interest t %ispaidtowa or

Explanation / Answer

(a)

Using the formula :

P = r(PV)/ [ 1-(1+r)-n]

r= 0.09/12 =0.0075

PV= $7500

n = 4×12= 48

P = [0.0075×7500]/[1-(1+0.0075)-48]

= $186.64

(b) Total amount paid over the course of loan :

A = $186.64×12×4= $8958.72

(c) of the total amount paid, the percentage that paid towards the principle is :

(7500/8958.72)×100= 83.71%

Interest = 8958.72-7500 = $1458.72

Of the total amount paid, the percentage that paid toward the interest is :

(1458.72/8958.72)×100 = 16.29%

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