Question:
Sandy Kupchack just graduated from State University with a bachelor’s degree in history. During her four
years at the university, Sandy accumulated $12,000 in student loans. She asks for your help in
determining the amount of the quarterly loan payment. She tells you that the loan must be paid back in
five years and that the annual interest rate is 8%. Payments begin in three months.
Required:
Determine Sandy’s quarterly loan payment.
Answer:
Annuity = $12,000 = $734 = Payment
16.35143
Present value of an ordinary annuity of $1: n = 20, i = 2% (from Table 4)
5 years x 4 quarters = 20 periods
8% ÷ 4 quarters = 2%
Sandy Kupchack just graduated from State University with a bachelor’s degree in history. During her four
years at the university, Sandy accumulated $12,000 in student loans. She asks for your help in
determining the amount of the quarterly loan payment. She tells you that the loan must be paid back in
five years and that the annual interest rate is 8%. Payments begin in three months.
Required:
Determine Sandy’s quarterly loan payment.
Answer:
Annuity = $12,000 = $734 = Payment
16.35143
Present value of an ordinary annuity of $1: n = 20, i = 2% (from Table 4)
5 years x 4 quarters = 20 periods
8% ÷ 4 quarters = 2%
