Beth obtained a student loan of 75000 to finish her last 2 y

Beth obtained a student loan of $75,000 to finish her last 2 years of medical school. She would make no payments until finished, but the loan would accumulate interest at 3.9% compounded monthly, when she finished school, Beth was to begin monthly payments that would repay the loan in ten years at 3.9% interest. (Round your final answers to two decima places.) she (a) Find the amount of the loan when Beth finished. (b) Find the monthly payments.

Solution

a) Amount of loan when Beth finished $ 81,073.94 Working; Amount of loan when Beth finished will be the loan amount plus interest on that lona amount payable till she finish medical school. Future Value of loan = Loan Amount *(1+i)^n Where, = 75000*(1+0.00325)^24 i 3.9%/12 = 0.00325 = $ 81,073.94 n 2*12 = 24 b) Monthly Payment $ 816.99 Working: Monthly payment will be such amount so that present value of that payments become equal to amount calculated as above. Present Value of annuity of 1 = (1-(1+i)^-n)/i Where, = (1-(1+0.00325)^-120)/0.00325 i 3.9%/12 = 0.00325 =    99.235333 n 10*12 = 120 Monthly Payment = Loan Amount/Present Value of annuity of 1 = $ 81,073.94 / 99.235333 = $       816.99