At graduation, you have a student loan of $16,000. The loan has a fixed annual interest rate of 6.8%, compounded monthly, for 10 years. What will your monthly payments be? (Enter numeric answers to 2 decimal places.)


To calculate the monthly payments for the student loan, we will use the formula for the monthly payment on an amortizing loan:

\[
M = P \frac{r(1 + r)^n}{(1 + r)^n - 1}
\]

where:

- $ M $ is the monthly payment
- $ P $ is the loan principal (\$16,000)
- $ r $ is the monthly interest rate (annual rate divided by 12)
- $ n $ is the total number of payments (months)

Given:

- $ P = 16000 $
- Annual interest rate = 6.8%, so the monthly rate $ r = \frac{6.8\%}{12} = 0.68\% = 0.0056667 $
- Loan term = 10 years, so $ n = 10 \times 12 = 120 $ months

Let's calculate the monthly payment $ M $.The monthly payment for the loan will be approximately **$184.13**.

Would you like further details or have any questions? Here are some related questions that might interest you:

1. How does the payment amount change if the interest rate decreases?
2. What would the total interest paid over the life of the loan be?
3. How does increasing the loan term affect the monthly payment?
4. What would the monthly payment be for a different principal amount?
5. How does compounding frequency impact the overall cost of the loan?

**Tip:** Making extra payments on your loan can significantly reduce the total interest paid and shorten the repayment period.

Learn how to calculate monthly payments for a $16,000 student loan with a fixed annual interest rate of 6.8%, compounded monthly over 10 years. Get a detailed solution using the monthly payment formula for amortizing loans. Suitable for high school students learning about interest and loan calculations.

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