Question

PLEASE HELP DONT UNDERSTAND

Michael is graduating from college in one year, but he will need a loan in the amount of $9,056 for his last two semesters. He may either receive an unsubsidized Stafford Loan with an interest rate of 6.8%, compounded monthly, or his parents may obtain a PLUS Loan with an interest rate of 7.8%, compounded monthly. The Stafford Loan has a grace period of six months from the time of graduation. Which loan will have a higher balance at the time of repayment and by how much?

Answer 1

When is the time of repayment?

Answer 2

The stafford loan, apparently requires repayment beginning 6 mo after graduation at which time he will owe this amount?
\[A=9056(1+\frac{.068}{12})^{12(1.5)}\]

Answer 3

But nothing is said about when repayment for the other loan begins.

Answer 4

That was all the info provided. :-/ Do you have a guess which would be the correct answer then?

The PLUS Loan has a higher balance by $94.67.

The PLUS Loan has a higher balance by $150.59.

The Stafford Loan has a higher balance by $237.40.

The Stafford Loan has a higher balance by $334.21.

Answer 5

Then let's assume the PLUS loan repayment has to begin in one year.

Answer 6

\[A=9056(1+\frac{.078}{12})^{12}\]

Answer 7

Calculate both of those and answer the question on that basis.

Answer 8

Which one did you get?

Answer 9

I assume the answers is the Plus loan has a higher balance by $94.67

Answer 10

Don't you have a calculator?

Answer 11

All you have to do is evaluate the two expressions that I wrote.

Answer 12

I did and I got that the stafford loan is $5143 more expensive than the PLUS loan

Answer 13

What did you get for the Stafford?