# (Solved Homework): You have an outstanding student loan with required payments of \$550 per month for the next four years. The interest rate on the loan is 10% APR. You ar…

You have an outstanding student loan with required payments of \$550 per month for the next four years. The interest rate on the loan is 10% APR. You are considering making an extra payment of \$150 today​ (that is, you will pay an extra \$150 that you are not required to​ pay).

a. If you are required to continue to make payments of \$550 per month until the loan is paid​ off, what is the amount of your final​ payment?

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(Solved Homework): You have an outstanding student loan with required payments of \$550 per month for the next four years. The interest rate on the loan is 10% APR. You ar…
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b. What effective rate of return​ (expressed as an APR with monthly​ compounding) have you earned on the \$150​?

SOLUTION:

 Interest rate 10.00% Monthly payment 550.00 Years to pay 4 Current balance \$21,685.49 PV(10%/12 , 4year*12, 550) * -1 = \$21,685 .49 Extra payment 150.00 Current balance after extra payment 21,535.49 21,685.49 – 150 = 21,535.49 Money left over if last payment stays the same \$223.40 FV(10%/12, 4 *12,-550,21,535.49) = \$223.40 Interest rate earned over the period 10.00% ((22.40/150)^(1/(4*12))-1)*12 = 9%

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