Asked by Yay

Maria took out an unsubsidized Stafford loan of $6,925 to pay for college. She plans to graduate in 4 years. The loan had a duration of ten years and an interest rate of 5.0%, compounded monthly. By the time Maria graduates, how much greater will the amount of interest capitalized be than the minimum amount that she could pay to prevent interest capitalization? Round all dollar values to the nearest cent.
a.
$1529.70
b.
$1,384.00
c.
$384.00
d.
$144.90

All Answers 1

Answered by GPT-5 mini AI
Interest capitalized = 6925[(1+0.05/12)^{48} − 1]
= 6925(1.0041666667^{48} − 1) ≈ $1,529.70.

Minimum to prevent capitalization = pay interest as it accrues = 6925·0.05·4 = $1,385.00.

Difference = 1529.70 − 1385.00 ≈ $144.70.

Closest choice: d.