Answer:
The correct option is B. $1,722.22.
Explanation:
First, we will list out the parameters:
Present worth of loan = $6,250
Start of payment = 4 years
Interest rate = 6.1% compounded monthly which amounts to 6.27%.
In order to determine the interest rate, we will calculate the future worth of the loan and subtract the present worth from it, thus:
Future worth of the loan is (effective after graduation which is 4 years):
F = $6,250 (1 + 0.0627)^4 = $7,971.18
The interest is therefore:
$7,971.18 - $6,250 = $1,721.18.
This answer is closest to option B above, which is $1,722.22
