(Student Loans MC)

A student is graduating from college in 18 months but will need a loan in the amount of $6,720 for the last three 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 3.99%, compounded monthly, and a grace period of six months from time of graduation.

PLUS loan: annual interest rate of 4.99%, compounded monthly, with a balance of $7,241.17 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 $107.41 at the time of repayment.
The PLUS loan will have a higher balance by $107.41 at the time of repayment.
The Stafford loan will have a higher balance by $36.53 at the time of repayment.
The PLUS loan will have a higher balance by $36.53 at the time of repayment.

Question

(Student Loans MC)

A student is graduating from college in 18 months but will need a loan in the amount of $6,720 for the last three 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 3.99%, compounded monthly, and a grace period of six months from time of graduation.

PLUS loan: annual interest rate of 4.99%, compounded monthly, with a balance of $7,241.17 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 $107.41 at the time of repayment.
 The PLUS loan will have a higher balance by $107.41 at the time of repayment.
 The Stafford loan will have a higher balance by $36.53 at the time of repayment.
 The PLUS loan will have a higher balance by $36.53 at the time of repayment.

Phantomdex · Answer

The Stafford loan will have a higher balance of $36.53 at the time of repayment. The correct option is C. What is a loan calculation formula? The formula: PV = PMT/i[1 - {1/(1+i)ⁿ] PV denotes the loan sum.