You owe $35,000 on student loans at an annual interest rate of 4.15% compounded monthly. You want to pay off the loan in 13 years.

Question

What will your monthly payments be?

How much interest do you pay?

Answer 1

We use the annuity fromula. The effective monthly rate is 4.15%/12. We have 13 years with 12 month per year so we have a total of 156 payments.

We know PV=PMT*B(i,t) where B=(1/i)(1-(1/(1+i))^T) = (12/.0415)(1- (1/(1 + .0415/12))¹⁵⁶) = 120.4098

your monthly payment = PV/B = 35,000/120.4098 =290.673 per month

Hope this helps