Question

madison accumulated 38,250 in student loans with a compound interest rate of 4%. she deferred her payments for 2 years because of employment. Determine the loan balance at the end of the deferment.

Answer 1

Step-by-step answer:

The compounding period is not indicated.

The general market practice for loans is compounded monthly, so this will be assumed.

interest = 4% (APR) = (0.04/12) per month (for monthly compounding)

The loan balance at the end of two years will therefore be

Balance = 38250 * (1+0.04/12)^(2*12)

= 38250 *(1+1/300)^(24)

= 41430.22 (to the nearest cent)