$7200 at 6.8% interest, student graduates 3 years and 9 months after loan is acquired; payments deferred for 6 months after graduation
What is your question?
Find the interest that accrues in a 30 day month, find the total amount of interest that will accrue before the regular payments begin using the 30 day month
To calculate the total amount of interest paid on a loan of $7200 with 6.8% interest over a period of 3 years and 9 months, with a 6-month deferment after graduation, follow these steps:
Step 1: Calculate the total time period of the loan, including the deferment period:
Time period of the loan = 3 years and 9 months + 6 months = 4 years and 3 months or 51 months.
Step 2: Convert the interest rate into a decimal:
Interest rate = 6.8% = 6.8/100 = 0.068.
Step 3: Calculate the interest accrued per month:
Monthly interest rate = 0.068/12 = 0.00567.
Step 4: Calculate the total interest paid over the loan period:
Total interest = Loan amount x Monthly interest rate x Time period of the loan.
Total interest = $7200 x 0.00567 x 51.
Total interest = $2071.97.
To calculate the total amount due at the end of the loan term, we need to break down the calculation into separate periods:
1. Loan Period: The loan period is the total duration from when the loan is acquired until the student graduates. In this case, the loan period is 3 years and 9 months.
2. Deferment Period: The deferment period is the time after the student graduates when no payments are required. In this case, the deferment period is 6 months.
Now, let's calculate the interest accrued during each period:
1. Loan Period: To calculate the interest accrued during the loan period, we multiply the principal amount ($7200) by the interest rate (6.8%) and then multiply by the time period in years. The time period in this case is 3 years and 9 months, which is approximately 3.75 years.
Interest Accrued during the Loan Period = ($7200) x (0.068) x (3.75) = $1846.40
2. Deferment Period: Since no payments are required during the deferment period, no interest accrues.
Now, let's calculate the total amount due at the end of the loan term by adding the interest accrued during the loan period to the principal amount:
Total Amount Due = Principal Amount + Interest Accrued during Loan Period = $7200 + $1846.40 = $9046.40
Therefore, at the end of the loan term, the total amount due will be $9046.40.