Question

Garrett is graduating from college in twelve months, but he will need a loan in the amount of $6,785 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 get 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

The PLUS Loan has a higher balance by $72.54.

The PLUS Loan has a higher balance by $112.83.

The Stafford Loan has a higher balance by $177.86.

The Stafford Loan has a higher balance by $250.40

Answer 2

Can you post the equation for compound interest?

Answer 3

Not sure but what I did was $6,785 (1+0.068/12)^18 = $7511.43 for the Stanford Loan

$6,785 (1+0.078/12)^12 = $7333.57 for the PLUS loan

Then subtracted SL - PL and got $177.86.

So i'm thinking it's C

Answer 4

Uhm no, then we know it's not C, because The Stafford Loan has a grace period of six months.

Answer 5

Sorry I gotta go now, but hopefully @dan815 can help you out when he's done with his problem.

Answer 6

"for his last two semesters"

Answer 7

Oh okay thanks though

Answer 8

oh and the grace period starts from graduation, so he's not paying the extra percentage for 6 months

Answer 9

hey

Answer 10

omg

Answer 11

1 semester = how many months?

Answer 12

I'm guessing 12 or 6 months?

Answer 13

Garrett is graduating in 12 months, and Stafford Loan has grace period of 6 months after graduation, so repayments on Stafford Loan must start after 18 months

Answer 14

kk

Answer 15

sry 12* for 2 semesters

Answer 16

huh?

Answer 17

the compound interest formula