Question

You have just eamed your MBA and have three student loan balances outstanding. They all mature in 5 years. The amounts owed, and the associated interest rates are shown in the table below. You can also combine these loans (S64,000) into a consolidated loan from the bank at a rate of 7.2% annual interest for a period of 5 years. Should you consolidate these or stay with the three separate loans? Loan Balance Due Annual Interest Rate 1$20,000 2 $12,000 3 S32,000 6% 9% 5%

Answer 1

	CALCULATION OF INTEREST COST OF THREE LOANS
		Amount	Interest Rate	Interest Per Year	"X 5 "Years	=	Total interest
	Loan 1	$20,000	6%	1200	"X 5 "Years	=	$6,000
	Loan 2	$12,000	9%	1080	"X 5 "Years	=	$5,400
	Loan 3	$32,000	5%	1600	"X 5 "Years	=	$8,000
		Total Interest					$19,400
	CALCULATION OF TOTAL INTEREST PAID ON COMBINE LOANS @ 7.2% ANNUALLY
	CALCULATION OF INTEREST COST OF THREE LOANS
		Amount	Interest Rate	Interest Per Year	"X 5 "Years	=	Total interest
	Loan	$64,000	7%	4608	"X 5 "Years	=	$23,040
		Total Interest					$23,040
	Decission :
	Carrying 3 Loans have the total interest amopunt = $ 19,400 and combine loan have Total interest is $ 23,040
	So it is better to keep the three loans
	Answer = Stay with the three separate loans