Question

On your student​ loans, if​ possible, try to make​ interest-only payments while you are still in school. If interest is not​ repaid, it folds into principal after graduation and can cost you hundreds​ (or thousands) of extra dollars in finance charges. For​ example, Sara borrowed ​$5000 at the beginning of her freshman year and another ​$4,000 at the beginning of her junior year. The interest rate​ (APR) is 9​% per​ year, compounded​ monthly, so​ Sara's interest accumulates at 0.75​% per month. Sara will repay what she owes as an ordinary annuity over 60​ months, starting one month after she graduates in the summer term of her fourth full year of college.

I got stuck on part D, could someone do the last two parts of D being:

How much interest does Sara repay without interest payments during school and with interest payments while in​ college?

The total interest with interest paid while in school is...

and

How much interest does Sara repay with interest payments during school and with interest payments while in​ college?

The total interest without interest paid while in school is... (I got $5904 for this part but I am lead to believe is it also incorrect)

Save Homework: Chapter 6 Homework Score: 2 of 3 pts 4 of 5 (4 complete) HW Score: 45%, 4.5 of 10 pts %x Problem 6-62 (algorithmic) 13 Question Help O On your student loans, if possible, try to make interest-only payments while you are still in school. If interest is not repaid, it folds into principal after graduation and can cost you hundreds (or thousands) of extra dollars in finance charges. For example, Sara borrowed $5,000 at the beginning of her freshman year and another $4,000 at the beginning of her junior year. The interest rate (APR) is 9% per year, compounded monthly, so Sara's interest accumulates at 0.75% per month. Sara will repay what she owes as an ordinary annuity over 60 months, starting one month after she graduates in the summer term of her fourth full year of college. Click the icon to view the interest and annuity table for discrete compounding when i = 0.75% per month a. How much money does Sara owe upon graduation if she pays off monthly interest during school? Sara owes $ 9000. (Round to the nearest dollar.) b. How much money does Sara owe if she pays no interest at all during her school years? Sara owes $ 11943. (Round to the nearest dollar.) c. After graduation, what is the amount of the monthly loan repayment in Parts (a) and (b)? Monthly payment with interest repaid each month is $ 1872. (Round to the nearest cent.) Monthly payment with no interest repaid is $ 248.4.(Round to the nearest cent.) d. How much interest does Sara repay without interest payments during school and with interest payments while in college? The total interest with interest paid while in school is $ 4752. (Round to the nearest dollar.) Enter your answer in the answer box and then click Check Answer. 1 part remaining Clear All Check Answer

Answer 1

She borrowed $ 5000 at T = 0 and another 4000 at time period 2.

$ 5,000 will be there for next 4 years and $ 4,000 for next two years.

A. When she pays interest when in school total amount she owes = $ 5,000+ $ 4,000 = $ 9,000

B. When she doesn't pay interest the interest gets accumulated into the principal. We can determine the total interest that gets accumulated into principal.

Interest on $ 5,000 per month can be calculated using the interest rate of 0.75% per month

1=5.000 0.0075 = 37.5

The interest of $ 37.5 per month will get accumulated into the account or the principal thus the total amount added to principal upon a borrowing of $ 5,000 will be

15.000 = 37.5(F.A.0.75%. 48

15,000 = 37.5 x 1.007548 – 1 -= 2, 157.026667 0.0075

Similarly we can calculate the interest amount that will get accumulated into the principal due to the borrowing of $ 4,000 for two years.

Monthly interest = 0.0075 × 4,000 = $ 30

Thus $ 30 will earn interest for next 24 months at a rate of 0.75% per month.

Interest = 30(F/A,0.75%,24) = $ 785.65411

Total interest that get accumulated to the principal

= 2157.026667 + 785.65411

= $ 2,942.68

Total amount she owe when no interest is paid

= $ 9,000 + 2,942.68

= $ 11,942.68

= $ 11,943.

C. When she pays interest in school loan principal = $9000

Monthly loan payment = $ 9,000(A/P,0.75%,60)

A= 9,000 x 0.0075 1 – 1.0075-60

S A =9,000 x 0.02075835

A = $186.82

Monthly instalment = $ 187

Case 2 when no interest is paid while being in school. Principal = $ 11,943

Monthly installment = $ 11,943 × 0.2075835 = $ 247.91

Monthly payment = $ 248 (Approximately)

D. When she doesn't pay any interest while at school then total interest paid by her = $ 247.91 × 60 - $ 9,000

= $ 14,874.6246 - 9,000

= $ 5,875

When she pays interest while at school total interest paid by her =(186.825 × 60 + 5,000 × 0.0075 × 48 + 4,000 × 0.0075 × 24) - 9,000

= (11,209.51 + 1,800 + 720) -9,000

= $ 4,730

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