Edgar has taken out a $6,250 unsubsidized Stafford loan to fund his four-year undergraduate degree. The loan has a duration of 1
0 years and an interest rate of 6.1%, compounded monthly. How much interest capitalization will have accrued by the time Edgar graduates? Round all dollar values to the nearest cent. a.
$1,670.30
b.
$1,722.22
c.
$664.35
d.
$1,524.96
The present worth of the loan is <span>$6,250 </span>The start of payment will after 4 years The nominal interest rate is 6.1% compounded monthly which is equal to 6.27% effective.
The future worth (after graduation) of the loan is F = <span>$6,250 (1 + 0.0627)^4 = $7,971.18
The interest is </span>$7,971.18 - $6,250 = $1,721.18 I didn't round off when solving these so it's not the exact answer among the choices but the closest is letter B <span>$1,722.22</span>
