"Assume you graduate with $31,300 in student loans with an interest rate of 5.25% compounded annually. If you want to have this debt paid off in full within three years, how much must you pay each month?"I know that the answer is $941.61 but I cannot seem to figure it out how to get there.

Question
Asked Oct 13, 2019
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"Assume you graduate with $31,300 in student loans with an interest rate of 5.25% compounded annually. If you want to have this debt paid off in full within three years, how much must you pay each month?"

I know that the answer is $941.61 but I cannot seem to figure it out how to get there. 

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Expert Answer

Step 1

The loan amount consists present value of all future payments.

It is given that,

Loan amount is $31,300.

Annual interest rate is 5.25%.

Number of years is 3. So, total number of payments would be 36.

Step 2

Monthly interest rate is calculated below:

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0.0525 i = 12 0.004375

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Step 3

The following expression can be used to...

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1-(1+i) -n Loan amount Monthly payment: i Here i is monthly interest nis number of payments

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