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Consider a student loan of $17,500 at a fixed APR of 6% for 25 years,a. Calculate the monthly paymentb. Determine the total amount paid over the term of the loan.c. Of the total amount paid, what percentage is paid toward the principal and what percentage is paid for interest.a. The monthly payment is $ 112.75B. The total nayment over the term of the loan is $?

User Swooby
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1 Answer

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PMT = P ( APR/ n)

-------------------

1 - ( 1+ APR/n) ^(-nY)

P is the amount of the loan

APR is the annual percentage rate

Y is the years that you are paying

n is the number of payments per year

P = 17500

APR = .06 ( we want it in decimal form)

Y = 25

n = 12 since it is monthly

PMT = 17500 ( .06/ 12)

-------------------

1 - ( 1+ .06/12) ^(-12*25)

PMT = 112.75

Part B

We need to determine how much we have to pay over the life of the loan

We have 25 years, making 12 payments a year ( 12 months in a year)

25*12 = 300 payments

300 payments at 112.75 =33825.00

Part C

Lets determine how much is interest

33825 - 17500 =16325 is interest. We took the total and subtracted the principal to find the interest

interest/total * 100% = percent interest

16325/33825 * 100% = 48.263119 % Rounding to the nearest tenth = 48.3 % interest

100 -% interest = % principal

100-48.3 =51.7% 51.7 % is principal

User Theis Egeberg
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