Question

Victor received an 8-year subsidized student loan of $21,000 at an annual interest rate of 4.55%. If Victor qualifies for an income-adjusted repayment plan of $400 per month, how long (in months) will it take him to repay the loan? (Round your answer up to the nearest month.)

Answer 1

It will take Victor approximately 19 months to repay the loan.

Step-by-step explanation:

To find out how long it will take Victor to repay the loan, we need to calculate the total amount of interest he will pay and then divide that by the monthly payment of $400. The formula to calculate the total amount of interest on a loan is: Total Interest = Principal x Interest Rate x Time. Given that Victor has a loan of $21,000 at an annual interest rate of 4.55%, the total interest can be calculated as follows:

Total Interest = $21,000 x 0.0455 x 8 = $7,308

Next, we divide the total interest by the monthly payment of $400:

Time = Total Interest / Monthly Payment = $7,308 / $400 = 18.27 months

Since we need to round up to the nearest month, it will take Victor approximately 19 months to repay the loan.