You have an outstanding student loan with required payments of $600 per month for the next four years. The interest rate on the loan is 9% APR (compounded monthly). Now that you realize your best investment is to prepay your student loan, you decide to prepay as much as you can each month. Looking at your budget, you can afford to pay an extra $200 a month in addition to your required monthly payments of $600, or $800 in total each month. How long will it take you to pay off the loan?
You have an outstanding student loan with required payments of $600 per month for the next four years. The interest rate on the loan is 9% APR (compounded monthly). Now that you realize your best investment is to prepay your student loan, you decide to prepay as much as you can each month. Looking at your budget, you can afford to pay an extra $200 a month in addition to your required monthly payments of $600, or $800 in total each month. How long will it take you to pay off the loan?
a. What monthly repayments will be required with the new loan?
Answer in dollars.
b. If you still want to pay off the mortgage in 25 years, what monthly payment should you make after you refinance?
c. Suppose you are willing to continue making monthly payments of $1,424.59. How long will it take you to pay off the mortgage after refinancing?
d. Suppose you are willing to continue making monthly payments of $1,424.59, and want to pay off the mortgage in 25 years. How much additional cash can you borrow today as part of the refinancing?
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