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At the beginning of each of her four years in college, Miranda took out a new Stafford loan. Each loan had a principal of $6,500, an interest rate of 7.5% compounded monthly, and a duration of ten years. Miranda paid off each loan by making constant monthly payments, starting with when she graduated. All of the loans were subsidized. What is the total lifetime cost for Miranda to pay off her 4 loans? Round each loan's calculation to the nearest cent. P=PVx(i/1-(1+i)^-n)

User Everald
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The total lifetime cost for Miranda to pay off her 4 loans is $177,768.00.

Step 1: Calculate the monthly payment for each loan

We can use the formula for the monthly payment of a loan to calculate the monthly payment for each of Miranda's loans. The formula is:

M = P * (i(1 + i)^n) / ((1 + i)^n - 1)

where:

M is the monthly payment

P is the principal amount of the loan

i is the monthly interest rate

n is the total number of payments

In this case, the principal amount is $6,500, the monthly interest rate is 7.5% / 12 = 0.625%, and the total number of payments is 10 years * 12 months/year = 120 months.

Plugging these values into the formula, we get:

M = 6500 * (0.00625(1 + 0.00625)^120) / ((1 + 0.00625)^120 - 1)

M = 370.35

Therefore, the monthly payment for each loan is $370.35.

Step 2: Calculate the total lifetime cost for all 4 loans

The total lifetime cost for Miranda to pay off her 4 loans is simply the sum of the monthly payments for all 4 loans. The monthly payment for each loan is $370.35, so the total monthly payment for all 4 loans is 4 * $370.35 = $1481.40.

The total lifetime cost for Miranda to pay off her 4 loans is therefore $1481.40 * 120 months = $177,768.

Step 3: Round the total lifetime cost to the nearest cent

The total lifetime cost of $177,768.00 should be rounded to the nearest cent, which is $177,768.00.

Therefore, the total lifetime cost for Miranda to pay off her 4 loans is $177,768.00.

User Joel Martinez
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