Final answer:
Determining the final payment and the effective rate of return on an additional $150 payment towards a student loan with a 10% APR requires specifics of the principal amount, which was not provided. The extra payment will decrease the principal and future interest, impacting the final payment and representing a return based on the interest saved.
Step-by-step explanation:
The main answer to this question involves determining the final loan payment and the effective rate of return on an additional payment towards a student loan. Since our student loan has an APR of 10% with monthly payments of $550 over the next four years, an extra payment will reduce the principal amount, thereby reducing the amount of interest paid over the loan's term, which can affect the final payment.We can use the concept of present value to calculate the new final payment after making the additional $150 payment. However, without the actual principal amount of the loan, we cannot compute the exact final payment or the effective rate of return on the extra payment. The process to find the effective rate of return involves comparing the interest saved by the extra payment against the payment itself and expressing this as an APR with monthly compounding.In conclusion, an extra $150 payment will decrease the balance and therefore the interest accumulation, potentially reducing the final payment on the loan. The effective rate of return is essentially the interest rate that would equate the future value of the $150 saved in interest payments to the present value of $150 paid upfront.