Question

You are paying for college with loans with annual interest at a rate of 8.0% per year. You borrow $20,000 at the beginning of year 1 (that is, at the start of your freshman year), $22,000 at the beginning of year 2, $25,000 at the beginning of year 3 and $29,000 at the beginning of year 4. You make no payments during your college days and then make no payments during your next 2 years of graduate school. How much will you owe at the end of year 6 when you finish graduate school?

A. 96000.00

B. 111,974.40

C.125,184.12

D. 129,222.31

E. 134,606.58

How to solve using the BA II Plus Calculator.

Answer 1

SOLUTION:-

Year 1 2 Cash flow fv @ 8% $20,000 1.587 $22,000 1.469 $25,000 1.360 $29,000 1.260 $0 1.166 $0 1.080 1.000 future value at the end of 7 years future cash flows $31,737.49 $32,325.22 $34,012.22 $36,531.65 $0.00 $0.00 5 $0.00 $134,606.58