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You have an outstanding student loan with required payments of $500 per month for the next 4 years. The interest rate on the loan is 11% APR (monthly). You are considering making an extra payment of $100 today (that is, you will pay an extra $100 that you are not required to pay). If you are required to continue to make payments of $500 per month until the loan is paid off, what is the amount of your final payment? What effective rate of return (expressed as an APR with monthly compounding) have you earned on the $100?

You have an outstanding student loan with required payments of $500 per month for the next 4 years. The interest rate on the loan is 11% APR (monthly). You are considering making an extra payment of $100 today (that is, you will pay an extra $100 that you are not required to pay). If you are required to continue to make payments of $500 per month until the loan is paid off, what is the amount of your final payment? What effective rate of return (expressed as an APR with monthly compounding) have you earned on the $100?

Essentials Of Investments
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
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You have an outstanding student loan with required payments of $500 per month for the next 4 years. The interest rate on the loan is 11% APR (monthly). You are considering making an extra payment of $100 today (that is, you will pay an extra $100 that you are not required to pay). If you are required to continue to make payments of $500 per month until the loan is paid off, what is the amount of your final payment? What effective rate of return (expressed as an APR with monthly compounding) have you earned on the $100?
Transcribed Image Text:You have an outstanding student loan with required payments of $500 per month for the next 4 years. The interest rate on the loan is 11% APR (monthly). You are considering making an extra payment of $100 today (that is, you will pay an extra $100 that you are not required to pay). If you are required to continue to make payments of $500 per month until the loan is paid off, what is the amount of your final payment? What effective rate of return (expressed as an APR with monthly compounding) have you earned on the $100?
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