Huai takes out a $3,600 student loan at 6.6% to him with 2 years of community college. after finishing the 2 years, he transfers to a state university and borrows another $11,600 to defray expenses for the 5 semesters he needs to graduate. he graduates 4 years and 4 months after acquiring the first loan and payments are deferred for 3 months after graduation. the second loan was acquired 2 years after the first and has an interest rate of 7.3%. find huai’s monthly payment when regular payments begin.

calculate the monthly payment on loan 1 (community college) round your answer two decimal places.

calculate the monthly payment on loan 2. round your answer two decimal places.

a. The monthly payment on loan 1 is $76.03.

b. The monthly payment on loan 2 is $411.69.

Explanation:

a. Calculate the monthly payment on loan 1.

To determine the amount of periodic payments, the present value of annuity formula should be used:

Where:

PV= present value

p=periodic payment

i=rate of interest

n=number of periods

We get the data for this exercise:

PV= 3,600 (loan).

p= unknown (we must find this value)

i= 6.6% or 0.066. However, because we need to know the monthly payment, the interest rate should be divided by 12 (0.066 / 12).

n= 4 years and 7 months, that is 55 months.

And we replace in the formula:

Therefore:

The monthly payment on loan 1 is $76.03.

b. Calculate the monthly payment on loan 2.

We get the data for this exercise:

PV= 11,600 (loan 2).

p= unknown (we must find this value)

i= 7.3% or 0.073. However, because we need to know the monthly payment, the interest rate should be divided by 12 (0.073 / 12).

n= 2 years and 7 months, that is 31 months.

And we replace in the formula:

Therefore:

The monthly payment on loan 2 is $411.69.