Question

A student applied for NLSPS to pay for his tuition in year 2, year 3 and year 4 of his undergraduate study. The tuition fee is $74,000 per year. Assuming the annual interest rate and the study interest rate are both 1.1132%, calculate the monthly installment amount to pay off the dent in 120 months after graduation.

Need formula and answer only. Thanks.

Answer 1

Lets calculate the final amount till the beginning of year 5 on which EMI can be calculated.

Money borrowed in year 1 will fetch rate of interest for 4 years which makes it 74,000 (1 + 0.011132)4 = $77,350.5

Money borrowed in year 2 will fetch rate of interest for 3 years which makes it 74,000 (1 + 0.011132)3 = $76,498.92

Money borrowed in year 3 will fetch rate of interest for 2 years which makes it 74,000 (1 + 0.011132)2 = $75,656.71

Money borrowed in year 4 will fetch rate of interest for 1 years which makes it 74,000 (1 + 0.011132)1 = $74,823.77

Total amount pending to bank after graduation is sum of all four payments = $304,329.9

EMI can be calculated as: [P * r * (1 + r)n] / [(1 + r)n -1]

where P is $304,329.9

n = 120 months

r is rate of interest per month. As it is 1.1132% per year, it would be 1.1132 / 12 = 0.0928% which is 0.000928

EMI = [304,329.9 * 0.000928 * (1 + 0.000928)120] / [(1 + 0.000928)120 -1]

EMI = $2,681.031 per month