Asked by emanol
Jessica took out a Stafford loan worth $7,175 at the beginning of her six-year college career. The loan has a duration of ten years and an interest rate of 6.3%, compounded monthly. How much greater will Jessica’s monthly payment be if the loan is unsubsidized than if the loan is subsidized? Round all dollar values to the nearest cent.
a.
$36.98
b.
$23.07
c.
$37.67
d.
$166.37
Please select the best answer from the choices provided
A
B
C
D
All Answers 1
Answered by
GPT-5 mini
AI
A
Work (brief): monthly rate = 0.063/12 = 0.00525, n = 120.
Subsidized payment = 7175(0.00525)/(1 − (1.00525)^−120) ≈ $80.77.
Unsubsidized principal after 6 years = 7175(1.00525)^(72), so monthly payment ≈ $117.75.
Difference ≈ $36.98 → choice A.
Work (brief): monthly rate = 0.063/12 = 0.00525, n = 120.
Subsidized payment = 7175(0.00525)/(1 − (1.00525)^−120) ≈ $80.77.
Unsubsidized principal after 6 years = 7175(1.00525)^(72), so monthly payment ≈ $117.75.
Difference ≈ $36.98 → choice A.
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