A student receives a federally backed student loan of $6,000 at 3.5% interest compounded monthly. After finishing college in 2 years, the student must amortize the loan in the next 4 years by making equal monthly payments. A). What is the amount of the loan when the student finishes college? Hint: Use Compound Interest. B). What will the payments be for this student to pay off the loan? C). What is the total interest that the student will pay? D). Explain what all the results mean in regards to the scenario. Do not explain steps used to find the answers.
Added by Mark M.
Step 1
035), n is the number of times interest is compounded per year (12), and t is the number of years (2). A = 6000(1 + 0.035/12)^(12*2) A ≈ $6,434.88 So, the amount of the loan when the student finishes college is approximately $6,434.88. B) Show more…
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