Q2

Shawn just graduated from college and got a job immediately. While in college he used loans from Sallie Mae to pay for his tuition. The total amount he borrowed from Sallie Mae is $60,000.

You are a financial analyst with Sallie Mae and you have been asked to calculate the amount Shawn needs to pay once every year for 7 years in order to pay off the loan and interest. Sallie Mae charges 8%.

Notes:

Show the steps

Identify the key elements from the questions

Draw the complete cash flow diagram (line, periods, arrows, amounts)

State the given information and the value you need to find

Select the correct time value calculation

Calculate and interpret the answer.