Question

(Student Loans MC)

A student is graduating from college in one year but will need a loan in the amount of $4,980 for the last two semesters. The student may receive either an unsubsidized Stafford Loan or a PLUS Loan. The terms of each loan are:

Unsubsidized Stafford Loan: annual interest rate of 6.25%, compounded monthly and a payment grace period of six months from time of graduation

PLUS loan: annual interest rate of 7.25%, compounded monthly, with a balance of $5,353.29 at graduation

Which loan will have a higher balance and by how much at the time of repayment?

The Stafford loan will have a higher balance by $114.84 at the time of repayment.
The PLUS loan will have a higher balance by $114.84 at the time of repayment.
The Stafford loan will have a higher balance by $52.97 at the time of repayment.
The PLUS loan will have a higher balance by $52.97 at the time of repayment.

Answer 1

Alright so first, what do you think the answer might be? If you're not sure what answers do you think you could cross out based on the information?

Answer 2

c and d?

Answer 3

Right, now why do you think that?

Answer 4

the answers are to little, not high enough

Answer 5

Correct. Now based off the question, between A and B, which one do you think it is?

Answer 6

a?

Answer 7

Why's that?

Answer 8

Because that seems like the right one. Am i wrong?

Answer 9

No, you are actually correct, it's just that if you look at the wording here, PLUS gives you the end amount whereas Standford tells you what percentage it will be going up from, by graduation time.

Answer 10

Therefore your answer is A.

Answer 11

oh nice :)