Question

I Pluvien 444 (diyor ) The Stafford plan now offers student loans at 5% annual interest. After two years the interest rate will increase to 7% per year. If you borrow $5,000 now and $5,000 each year thereafter for a total of four installments of $5,000 each, how much will you owe at the end of year 4? Interest is compe the end of each year. Click the icon to view the interest and annuity table for discrete compounding when i=5% per year. Click the icon to view the Interest and annuity table for discrete compounding when / -7% per year. 3 At the end of year 4 you will owe $ (Round to the nearest dollar)

Answer 1

So, At the end of year 4 you will owe $ 23,396

for and boot years www year 4 = Interest rate for 1st two years = 5% = 0.05 Interest rate after 1st two years = 41 = 0.07 Total time = 4 years a & Interest rate for year 1 and year 2 = 0.05 Interest rate for year 3 and year 4 4 yearly installimento = $5,800. We have to calculate the future nahie of all the installments at the end of year 4 : Future Value (FV) = 1(i+8)" Fu of 18 year indtalment ė 5000 (1+0-05)*(1+0+0+)" EV og gud yeur imetalwent = 5000(1+0 -05)(1+007)? FV of 3rd gear installeneut = 5000 (1+0.07)2 tv of 4th year installement = 5000 (1+007). . Total FV of all four installements and is the total money that will be onwed. FV = 5000/1105) 371-04) + 5000 (1005) (1.07) 2 + 588D (1107)2 + 5opo (109) = 5000 (1.26225+ 1.2021 + 1.1469 + 4.07) = 5000 x 467925 = $ 23,396*25 ~ $ 23, 396 (rounded to nearest dollar) - Non 5000 11+0.07 = 5000 Lito .07 110111 miens tal money 2027