Answered: Suppose you have a student loan of…

Suppose you have a student loan of $50,000 with an APR of 12% for 40 years. Complete parts (a) through (c) below. a. What are your required monthly payments?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 14P

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Suppose you have a student loan of $50,000 with an APR of 12% for 40 years.

Complete parts (a) through (c) below.

a. What are your required monthly payments?

b. Suppose you would like to pay the loan off in 15 years instead of 30. What monthly payments will you need to make?

c. Compare the total amount you'll pay over the loan term if you pay the loan off in 15 years versus 30 years.

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