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A student loan for $12000 can be paid back in 10 years at 10% p.a or in 15 years at 9%...

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timw996 | Student, Grade 10 | (Level 1) Salutatorian

Posted September 6, 2013 at 2:39 PM via web

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A student loan for $12000 can be paid back in 10 years at 10% p.a or in 15 years at 9% per annum. What is the difference in the final amount due.

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justaguide | College Teacher | (Level 2) Distinguished Educator

Posted September 6, 2013 at 2:44 PM (Answer #1)

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A student loan of $12000 can be paid back either in 10 years or in 15 years. The interest rate applicable if it is paid back in 10 years is 10% per annum. The amount due after 10 years in this case is `12000*(1+10/100)^10` = 31124.9

If the loan is paid back in 15 years, an interest rate of 9% per annum is applicable. The final amount due in this case is `12000*(1 + 9/100)^15` = 43709.78

The difference in the amount that has to be paid back in the two cases is $12584.88

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