Assume you graduate from university with a $37,000 student loan. If your interest rate is fixed at 4.22% APR with monthly compounding and you will repay the loan over a 10-year period be your monthly payment? The monthly payment will be $ (Round to two decimal places)
Assume you graduate from university with a $37,000 student loan. If your interest rate is fixed at 4.22% APR with monthly compounding and you will repay the loan over a 10-year period be your monthly payment? The monthly payment will be $ (Round to two decimal places)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![**Student Loan Monthly Payment Calculation**
When you graduate from university with a $37,000 student loan, it's important to understand the terms of repayment, including how much you’ll be paying monthly. Assuming your loan has a fixed interest rate of 4.22% APR, compounded monthly, and you're set to repay it over a 10-year period, let's explore what your monthly payment will look like.
**Problem Statement:**
"Assuming you graduate from university with a $37,000 student loan. If your interest rate is fixed at 4.22% APR with monthly compounding and you will repay the loan over a 10-year period, what will be your monthly payment?"
There is a box provided for entering the monthly payment, which should be rounded to two decimal places. This calculation is fundamental for financial planning and understanding the long-term commitments of student loans.
Use the standard formula for an amortizing loan to calculate the monthly payment:
\[
M = \frac{P \times r \times (1 + r)^n}{(1 + r)^n - 1}
\]
Where:
- \( M \) is the total monthly mortgage payment.
- \( P \) is the principal loan amount ($37,000).
- \( r \) is the monthly interest rate (annual rate/12 months).
- \( n \) is the number of payments (months).
By solving this, you will know how much you need to budget for your monthly student loan payments.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fce31b907-ccde-4608-9095-702f0fde7fce%2F1704e2b7-4187-46b1-a476-836b59568337%2Fez4i4w_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Student Loan Monthly Payment Calculation**
When you graduate from university with a $37,000 student loan, it's important to understand the terms of repayment, including how much you’ll be paying monthly. Assuming your loan has a fixed interest rate of 4.22% APR, compounded monthly, and you're set to repay it over a 10-year period, let's explore what your monthly payment will look like.
**Problem Statement:**
"Assuming you graduate from university with a $37,000 student loan. If your interest rate is fixed at 4.22% APR with monthly compounding and you will repay the loan over a 10-year period, what will be your monthly payment?"
There is a box provided for entering the monthly payment, which should be rounded to two decimal places. This calculation is fundamental for financial planning and understanding the long-term commitments of student loans.
Use the standard formula for an amortizing loan to calculate the monthly payment:
\[
M = \frac{P \times r \times (1 + r)^n}{(1 + r)^n - 1}
\]
Where:
- \( M \) is the total monthly mortgage payment.
- \( P \) is the principal loan amount ($37,000).
- \( r \) is the monthly interest rate (annual rate/12 months).
- \( n \) is the number of payments (months).
By solving this, you will know how much you need to budget for your monthly student loan payments.
Expert Solution
Step 1: Define=monthly payment
The monthly payment amount can be calculated with the help of present value of annuity function. These monthly payment carry the payment for interest and loan.
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