Question

Henry wants to avoid interest capitalization on his $7,800 unsubsidized Stafford loan. Henry will graduate in four years, and the loan has a duration of ten years. The loan has an interest rate of 5.6%, compounded monthly. How much must Henry pay every month to avoid interest capitalization?

Answer 1

To avoid interest capitalization, Henry should pay $68.64 monthly.

Solution:
1. Multiply 10 years by 12 , then Henry will pay for about 120 months.
2. Multiply 7800 by 5.6% or 0.056 to get the interest rate = $436.8 .
3. Add $7800 and the interest rate $436.8 to get the overall total = $8,236.8 .
4. Divide the overall total by 120 to get the monthly payment = $68.64 .

Answer 2

Step-by-step explanation:

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