Brandon just graduated from college. Unfortunately, Brandon’s education was fairly costly; the student loans that he took out to pay for his education total $95,000. The provisions of the student loans require Brandon to pay interest equal to the prime rate, which is 8 percent, plus a 1 percent margin—that is, the interest rate on the loans is 9 percent. Payments will be made monthly, and the loans must be repaid within 20 years. Brandon wants to determine how he is going to repay his student loans.
a. If Brandon decides to repay the loans over the maximum period—that is, 20 years—how much must he pay each month?
b. If Brandon wants to repay the loans in 10 years, how much must he pay each month?
c. If Brandon pays $985 per month, how long will it take him to repay the loans?