Matt needs to borrow money to go to college. He has been granted a student loan...

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Matt needs to borrow money to go to college. He has been granteda student loan of $7000. When is school, he actually only needed$6000. He has two options for paying it back. The great news aboutstudent loans is that interest does not calculate until he finishesschool. What should be choose and why? • Option A: Pay back $1000extra before the interest starts. Pay back the $6000 loan over 3years at 5.2% interest compounded annually by making monthlypayments. • Option B: Use the extra $1000 to help buy a car. Payback the entire student loan over 4 years at 5.2% interestcompounded annually by making monthly payments.

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4.2 Ratings (715 Votes)

Option 1 Payback 1000 Borrowing 6000 Interest Rate 52 and Repayment Tenure 3 years or 3x1236 months Applicable Monthly Rate 5212 04333 Let the See Answer

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Transcribed Image Text

Matt needs to borrow money to go to college. He has been granteda student loan of $7000. When is school, he actually only needed$6000. He has two options for paying it back. The great news aboutstudent loans is that interest does not calculate until he finishesschool. What should be choose and why? • Option A: Pay back $1000extra before the interest starts. Pay back the $6000 loan over 3years at 5.2% interest compounded annually by making monthlypayments. • Option B: Use the extra $1000 to help buy a car. Payback the entire student loan over 4 years at 5.2% interestcompounded annually by making monthly payments.