SOLUTION: Hi, I'm having a little trouble with this question: Consider a student loan of $22,500 at a fixed APR of 12% for 25 years. a. Calculate the monthly payment. b. Determine

Algebra ->  Customizable Word Problem Solvers  -> Misc -> SOLUTION: Hi, I'm having a little trouble with this question: Consider a student loan of $22,500 at a fixed APR of 12% for 25 years. a. Calculate the monthly payment. b. Determine      Log On

Ad: Over 600 Algebra Word Problems at edhelper.com


    

Question 1137170: Hi,
I'm having a little trouble with this question:
Consider a student loan of $22,500 at a fixed APR of 12% for 25 years.
a. Calculate the monthly payment.
b. Determine the total amount paid over the term of the loan.
c. Of the total amount paid, what percentage is paid toward the principal, and what percentage is paid for the interest?
Thank you so much!
Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
the use of a financial calculator helps answer this problem.

it can be done with formulas, but that's not necessary unless your instructions specifically tell you that you have to use them.

you can use this online calculator.

https://arachnoid.com/finance/

here's the results of my analysis using this calculator.

$$$

your inputs to this calculator are:

present value = 22500
future value = 0
number of monthly time periods are 12 * 25 = 300
interest rate percent per monthly time period is 12% / 12 = 1.
payments are made at the end of each monthly time period.

you select PMt and the calculator tells you that the monthly payments are 236.98.

those payment are shown as negative because it's money you are paying out.

your total payments over the 25 year period are 300 * 236.98 = 71094.

your loan was for 22500.

the difference is how much you paid in interest over the 25 year period = 71094 - 22500 = 48594.

the online calculcator rounded the payment to the nearest penny.

that may be sufficient, but just in case, i did the same analysis using the TI-BA-II Business analyst calculator.

the answer from the use of that calculator was that the monthly payments needed to be 236.975432 per month.

multiply that by 300 and the total is 71092.6296.

subtract 22500 from that to get 48592.6296 which can be rounded to 48592.63.

either answer should be sufficient depending on how much detail your instructor is looking for.

for practical purposes, you would pay the rounded figure of 236.98 per month and any adjustment would be made at the end of the loan period.