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As an incoming college freshman, Tina received a 10-year $9,900 Federal Direct
Unsubsidized Loan with an interest rate of 4.29%. She knows that she can begin making
loan payments 6 months after graduation but interest will accrue from the moment the funds
are credited to his account. How much interest will accrue while she is still in school and
over the 6-month grace period for this freshman year loan?


Sagot :

The amount charged on the loan which is the loan interest rate, increases as the time after the initial amount is credited into the account increases.

  • The interest on the Federal Direct Unsubsidized Loan after 4 years 6 months is $1,911.195

Reasons:

The given parameter are;

Loan amount, the principal, P = $9,900

Duration of the loan = 10 years

Loan interest rate, R = 4.29%

Required:

The amount of interest that will accrue while she is still in school and over the 6-months grace period for the freshman loan.

Solution:

Based on a similar question on an online source, we have;

Interest, I = P × R × T

Where;

T = The time = The time the freshman is in school + 6 months

Therefore, normally, we have;

T = 4 years + 6 months = 4.5 years

R = 4.29% = 0.0429

Therefore;

Interest, I = 9,900 × 0.0429 × 4.5 = 1911.195

The interest that will accrue while she is still in school and over the 6-months grace period for the loan, I = $1,911.195

Learn more about the interest rate here:

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