Question

Sebastian has just graduated after four years of university. He took out an unsubsidized Stafford loan worth $8,180 to help pay for his tuition. The loan has a duration of ten years. If the loan has an interest rate of 5.3%, compounded monthly, how much interest capitalization has occurred by the time he graduated? Round all dollar values to the nearest cent.
a.
$721.93
b.
$842.25
c.
$1,926.97
d.
$1,734.24



Please select the best answer from the choices provided


A
B
C
D

Answer 1

Interest capitalized = 8180[(1 + 0.053/12)^(12·4) − 1].

Compute: 8180[(1 + 0.053/12)^48 − 1] ≈ $1,926.97.

Answer: C