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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? a. $14. 56 b. $43. 68 c. $36. 40 d. $31. 20.

Respuesta :

chilljain33

The correct statement is that Henry must pay around $48.68 each month to avoid interest capitalization on his unsubsidized Stafford loan of $7800. So, the correct option is B.

The calculation will be done by calculating the amount of interest and dividing such values by the number of months over the period of repayment.

Calculation of Interest Capitalization

  • The annuity of education loan will be,

  • [tex]\rm Annuity= 7800(1+ \dfrac{0.056}{12})^1^2^x^1^0\\\\\rm Annuity= \$13637.47[/tex]

  • The interest over such calculation is approximately $5837.47 and hence the payments to be made so that the interest does not capitalize will be,

  • [tex]\rm Monthly\ Payments = \dfrac{5837}{120}\\\\\rm Monthly\ Payments = 48.68[/tex]

Hence, the correct option is B that the monthly payments of $48.68 is to be done to avoid interest capitalization.

Learn more about interest capitalization here:

https://brainly.com/question/417585

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