You estimate that you will owe $45,300 in student loans by the time you graduate. The interest rate is 4.25 percent. If you want to have this debt paid in full within ten years, how much must you pay each month?

a. $411.09
b. $464.04
c. $514.28
d. $536.05
e. $542.50

Explanation:

For this case we can use present value calculation for an ordinary annuity in order to calculate the PMT each month.

The formula is given by:

  (1)

Where:

PMT represent the monthly payment

PV represent the present value on this case 45300

i  represent the discount rate and for this case we know that i =4.25 % = 0.0425

n  represent the number of periods that the interest is compound in 1 year, we can assume that n =12 for this case

t represent the number of periods for which the annuity will last  t= 10 years

If we solve for the PV from formula (1) we got:

  (2)

And replacing the values we got:

And that would be the final answer for this case 464.042

1. avoid them

2. a talk with them

3. ask someone you trust

4. ignore

5. call police

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