In: Finance
A student takes out a loan of $1,900 at the beginning of each semester (semi-annually) for 13 semesters to pay for college. The loan charges 7.6% interest compounded semiannually. The student graduates after the 13 semesters and refinances the loan to a lower 6.9% rate compounded monthly with monthly payments (made at the end of each month) for 120 months. Find the monthly payment and the total interest paid.
The monthly payment is
$_____.
(Round to the nearest cent as needed.)
The total amount of interest paid is.
$_____.
(Round to the nearest cent as needed.)
Student take a loan of $ 1900 at the beginning of each semester, for 13 semesters. Calculating the future value of loan after 13 semesters.
Where, C= Periodic loan amount = $1900
r = Periodic Interest rate = 7.6%/2 = 3.8%
n= no of periods = 13
Future Value = $ 32381.64
So, the value of loan after 13 semesters = $ 32,381.64
Now, Student refinances the loan at lower rate of 6.9%, Calculating the monthly Payments:
Where, P= Loan amount = $ 32,381.64
r = Periodic Interest rate = 6.9%/12 = 0.575%
n= no of periods = 120
Monthly Payment = $ 374.31
So, The monthly payment is $ 374.31
Total Interest Paid = ($374.31*120)-$32381.64
Total Interest Paid = $ 12,535.56