Question

Briana received a 10-year subsidized student loan of $26,000 at an annual interest rate of 4.125%. Determine her monthly payment (in dollars) on the loan after she graduates in 2 years. (Round your answer to the nearest cent.)

Answer 1

$264.78

Explanation:

The government pays the interest on Briana's loan while she is in school. Her monthly payments will be for a loan of $26,000. The amount of the payment can be found from the amortization formula, or using a calculator or spreadsheet.

Payment amount

For a loan of principal amount P at annual rate r for t years, the monthly payment is ...

A = P(r/12)/(1 -(1 +r/12)^(-12t)) = $26000(0.04125/12)/(1 -(1 +0.04125/12)^(-120)) = $264.78

Briana's monthly payment after she graduates is $264.78.