Question

Kim is attending a 4-year college. as a freshman, she was approved for a 10 year, federal unsubsidized student loan in the amount of $7,900 at 4.29%. she knows she has the option of beginning repayment of the loan in 4.5 years. she also knows that during this nonpayment time, interest will accrue at 4.29%. how much interest will kim accrue during the 4.5-year nonpayment period?

a) $950.47
b) $1,265.15
c) $340.20
d) $1,495.20

Answer 1

The interest accrued during the 4.5-year nonpayment period is $950.47.

Step-by-step explanation:

To calculate the interest accrued during the 4.5-year nonpayment period, we need to use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the final amount, P is the initial principal balance, r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the time in years.

Given: P = $7,900, r = 4.29%, t = 4.5 years

Since the interest is compounded annually, n = 1.

Plugging the values into the formula:
A = $7,900(1 + 0.0429/1)^(1*4.5)