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 2 years ago
Alyssa may apply for an unsubsidized Stafford Loan with an interest rate of 6.8%, compounded monthly and a grace period of six months from the time of graduation. Or, Alyssa may have her parents apply for a PLUS Loan with an interest rate of 7.8%, compounded monthly. She will be graduating from college in a year and a half and needs a loan in the amount of $11,895. Which loan is the better choice and why?
 2 years ago
Alyssa may apply for an unsubsidized Stafford Loan with an interest rate of 6.8%, compounded monthly and a grace period of six months from the time of graduation. Or, Alyssa may have her parents apply for a PLUS Loan with an interest rate of 7.8%, compounded monthly. She will be graduating from college in a year and a half and needs a loan in the amount of $11,895. Which loan is the better choice and why?

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heatherlambert2
 2 years ago
Best ResponseYou've already chosen the best response.0The Stafford Loan is the better choice because it is $197.81 cheaper than the PLUS Loan. The PLUS Loan is the better choice because it is $256.32 cheaper than the Stafford Loan. The PLUS Loan is the better choice because it is $454.13 cheaper than the Stafford Loan. The Stafford Loan is the better choice because it is $273.50 cheaper than the PLUS Loan.

heatherlambert2
 2 years ago
Best ResponseYou've already chosen the best response.0@ajprincess @AravindG @Alyx_da_Boss @Anyssah @alahrichi1 @A.kumar

heatherlambert2
 2 years ago
Best ResponseYou've already chosen the best response.0I tried. Give me a formula and I can do it. I can't find the formula.

mathmate
 2 years ago
Best ResponseYou've already chosen the best response.0Amount after n months, compounded monthly A=P(1+r/12)^n r=interest rate per annum P=principal (borrowed amount) n=number of months money was borrowed. Calculate the amount to be repaid for each option and make your choice accordingly.

heatherlambert2
 2 years ago
Best ResponseYou've already chosen the best response.0@mathmate what would n be? i put 18, but i don't think that's right.

mathmate
 2 years ago
Best ResponseYou've already chosen the best response.0I am not too sure if the "grace period" is just an extended repay period where interest continues to grow. If you calculate it for n=18, you would get one of the answers. And for n=24, you would get another answer. The answer depends on when she is ready to repay (completely), 18 or 24 months. Make a choice.

heatherlambert2
 2 years ago
Best ResponseYou've already chosen the best response.0Grace period is the months where interest isn't charged. Like a credit card.

heatherlambert2
 2 years ago
Best ResponseYou've already chosen the best response.0I'm not getting the right answer. I'll just pick a random answer.

mathmate
 2 years ago
Best ResponseYou've already chosen the best response.0If that's the interpretation, then PLUS loan will charge (higher) interest for 24 months while the Stafford loan charges (lower) interest for 18 months. The difference comes to be $727.64, which is not one of the answers.

Anyssah
 2 years ago
Best ResponseYou've already chosen the best response.1The Stafford Loan is the better choice because it is $197.81 cheaper than the PLUS Loan.
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