Question

A student borrowed a total of $120,500 from the living expenses loan under FASP. Assuming th annual interest rate is 1%, calculate the quarterly installment amount if she wants to pay off the debt in 5 years after graduation.

Need formula and answer only. Thanks.

Answer 1

Borrowed amount = Principal, P= $120, 500

Rate of interest, r = 1% per annum

Time, t = 5

No. of installments in a year = no. of quarters in a year, n = 4

Total no. of quarterly installments that will be paid in order to repay the loan in 5 years = number of quarters in a year × number of years = n × t = 4 × 5

Quarterly installment amount can be calculated by calculating the total amount that needs to be repaid at the end of five years divided by total number of quarterly installments

Total amount to be repaid can be calculated using the following formula:

Where, A = total amount to be repaid at the end of five years

P = principal i.e. amount borrowed

r = rate of interest

n = number of quarters in a year

t = number of years

Total amount to be repaid at the end of five years = $147,032.9

Quarterly installment amount = A/(nt)

Quarterly installment amount = so, quarterly installment amount = $7351.645 = $7351.65 ( approximately)