To offset college expenses, at the beginning of your freshman year you obtain a

ID: 3214473 • Letter: T

Question

To offset college expenses, at the beginning of your freshman year you obtain a nonsubsidized student loan for $20,000. Interest on this loan accrues at a rate of 4.14% compounded monthly. However, you do not have to make any payments against either the principal or the interest until after you graduate. (a) Write a model giving the total amount, F, you will owe on this loan after t years in college. F(t) = dollars (b) What is the APR? % (c) What is the APY? (Round your answer to two decimal places.)

Explanation / Answer

i am assuming here that the rate of interest is 4.14% /month now the total amount you are going to pay at the end of your t years in college which means your 12t months in college F(t)=20000(1+0.0414)^12t =20000(1.0414)^12t APY=(((1.0414)^12t)-1)x100% APR=(4.14x12t)% Further references for http://www.investopedia.com/articles/basics/04/102904.asp#axzz2IlfJmYlJ

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To offset college expenses, at the beginning of your freshman year you obtain a

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