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) $7,900
b) $8,270.20
c) $9,371.20
d) $10,000

Answer 1

The interest that kim accrue during the 4.5-year nonpayment period is b) $8,270.20

Step-by-step explanation:

Kim's federal unsubsidized student loan has a principal amount of $7,900 and an annual interest rate of 4.29%. During the 4.5-year nonpayment period, interest will accrue on the loan. The formula to calculate the accrued interest is given by the formula:

`\[ \text{Accrued Interest} = \text{Principal} * \text{Interest Rate} * \text{Time} \]`

Substituting the values into the formula:

`\[ \text{Accrued Interest} = $7,900 * 0.0429 * 4.5 \]`

`\[ \text{Accrued Interest} = $8,270.20 \]`

Therefore, Kim will accrue $8,270.20 in interest during the 4.5-year nonpayment period. This amount is calculated by multiplying the principal amount, interest rate, and time. The interest accrues on the loan during the nonpayment period, contributing to the total amount Kim will need to repay once she begins the repayment phase. It's crucial for borrowers to be aware of the accruing interest during deferment or grace periods, as it adds to the overall cost of the loan. In this case, the accrued interest during the nonpayment period is (b) $8,270.20.