Question

Lois received a 9-year subsidized student loan of $35,000 at an annual interest rate of 5.875%. Determine her monthly payment on the loan after she graduates in 3 years. (Round your answer to the nearest cent.)

Lois received a 9-year subsidized student loan of $35,000 at an annual interest rate of 5.875%. Determine her monthly payment on the loan after she graduates in 3 years. (Round your answer to the nearest cent.)

Answer 1

Step 1:	Loan amount after 3 years
	PV	35000
	r	0.05875
	n	3
	FV= PV*(1+r)^n
	Where,
	FV= Future Value
	PV = Present Value
	r = Interest rate
	n= periods in number
	= $35000*( 1+0.059)^3
	=35000*1.18681
	= $41538.26
Step 2:	Monthly payment
	EMI
	Loan Amount	41538.26134
	Interest rate per period	0.48958333%
	Number of periods	72
	EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
	Where,
	EMI= Equal Monthly Payment
	P= Loan Amount
	R= Interest rate per period
	N= Number of periods
	= [ $41538.26x0.005 x (1+0.004895833)^72]/[(1+0.00004895833)^72 -1]
	= [ $203.36( 1.00004895833 )^72] / [(1.00004895833 )^72 -1
	=$685.96