Question

Bianca took out a $2,600 unsubsidized Stafford loan. She will be attending school for four years, and she wishes to have the loan paid off five years before its normal ten-year duration is finished. The loan has an interest rate of 6.2%, compounded monthly. How much will she have to pay monthly to avoid interest capitalization?

Answer 1

R=ai/1-(1+I)^-n. ,,this is the equation ...can put them into the equation and you be ok

Answer 2

Bianca need to pay $13.43 monthly to avoid interest capitalization.

Explanation:

Principal value = $2600

Time = 10 years = 120 months

Interest rate = 6.2% = 0.062

Now, Find amount of payment by using the formula :

`Payment = (Rate* Principal)/(1-(1+rate)^(-time))\\\\\implies Payment = (0.062* 2600)/(1-(1+0.062)^(-120))\\\\\implies Payment = \$ 161.32`

Total payment is to be paid in 1 year :

`\text{So, Monthly payment = }(161.32)/(12)=\$13.43`

Hence, Bianca need to pay $13.43 monthly to avoid interest capitalization.