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Bianca took out a $2,600 unsubsidized Stafford loan. She will be attending school for four years, and she wishes to have the loan paid off five years before its normal ten-year duration is finished. The loan has an interest rate of 6.2%, compounded monthly. How much will she have to pay monthly to avoid interest capitalization?

Verified Answer :

Aliwohaish12

R=ai/1-(1+I)^-n. ,,this is the equation ...can put them into the equation and you be ok

Answer:

Bianca need to pay $13.43 monthly to avoid interest capitalization.

Step-by-step explanation:

Principal value = $2600

Time = 10 years = 120 months

Interest rate = 6.2% = 0.062

Now, Find amount of payment by using the formula :

\(Payment = \frac{Rate\times Principal}{1-(1+rate)^{-time}}\\\\\implies Payment = \frac{0.062\times 2600}{1-(1+0.062)^{-120}}\\\\\implies Payment = \$ 161.32\)

Total payment is to be paid in 1 year :

\(\text{So, Monthly payment = }\frac{161.32}{12}=\$13.43\)

Hence, Bianca need to pay $13.43 monthly to avoid interest capitalization.

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