Consider a student loan of $25,000 at a fixed APR of 9% for 15 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.
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Step 1
To calculate the monthly payment, we can use the formula for the monthly payment on an installment loan: P = [r*PV] / [1 - (1 + r)^-n] where: P = monthly payment r = monthly interest rate (annual rate / 12) PV = present value, i.e., the amount of the loan n = Show more…
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