Olivia has taken out a $13,100 unsubsidized Stafford loan to pay for her college education. She plans to graduate in
our years. The loan has a duration of ten years and an interest rate of 7.6%, compounded monthly. By the time Olivia
graduates, how much greater will the amount of interest capitalized be than the minimum amount that Olivia could pay
to prevent interest capitalization? Round all dollar values to the nearest cent.
a. $654.45
b. $477.27
C. $995.60
d. $354.22

Question

23-06-2022
English

contestada

Olivia has taken out a $13,100 unsubsidized Stafford loan to pay for her college education. She plans to graduate in
our years. The loan has a duration of ten years and an interest rate of 7.6%, compounded monthly. By the time Olivia
graduates, how much greater will the amount of interest capitalized be than the minimum amount that Olivia could pay
to prevent interest capitalization? Round all dollar values to the nearest cent.
a. $654.45
b. $477.27
C. $995.60
d. $354.22

Respuesta :

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aliasger2709 aliasger2709 · Answer 1 · 2022-07-07T07:54:39+02:00

An unsubsidized Stafford loan is a non-needed loan. The amount of interest capitalized greater than the minimum amount Olivia could pay will be $654.45. Thus, option a is correct.

What is interest capitalization?

Interest capitalization is the addition of the unpaid interest amount to the principal amount of the federal loan taken by the students.

The amount is calculated by, [tex]\rm A = P(1 + \dfrac{r}{n})^{nt}[/tex]

Given,

Initial principal amount (P) = $13,100

Interest rate (r) = 7.6%

The times of the interest applied per time (n) = 12

Time elapsed (t) = 4

Substituting values above:

13100 (1 + 0.076 ÷ 12)⁽⁴⁸⁾ - 13100 = 4636.85

And,

13100 (0.076 ÷ 12) x 4 x 12 = 3982.40

4636.85 - 3982.40 = 654.45

Therefore, $654.45 is the amount that can prevent interest capitalization.

Learn more about interest capitalization here:

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