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Look at present value annuities from a different perspective. Student loans, and other kinds of loans. 1. The student gets a big lump of money

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Look at present value annuities from a different perspective. Student loans, and other kinds of loans. 1. The student gets a big lump of money NOW (NOW means in the PRESENT) to help pay for school. 2. The student agrees to pay back this lump of money, plus interest, to the lender by making regular smallish payments of SR over time (the term of the loan.) 3. At the end of the loan term, the original amount borrowed has been paid back, plus the interest. Examples: 1. To help pay for school, an undergraduate took out $40,000 in student loans at 4.45% interest. After graduation, the standard repayment plan is to repay the loan in 10 years with equal payments made at the end of each month. a. How much is the monthly payment amount? (Answers: $413.59 each month for 10 years) b. How much total interest does the student pay? ($9,630.80 in interest)

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