If you need to take out a $50,000 student loan 2 years before graduating, which loan option will result in the lowest overal cost to you: a subsidized loan with 6.8% interest for 10 years, a federal unsubsidized loan with 5.6% interest for 10 years, or a private loan with 5.0% interest and a term of 13 years? How much would you save ever the other options? All payments are deferred for 6 months after graduation and the interest is capitalized. (a) Find the total cost of the subsidized loan. The total cost of the subsidized loan is S Round your answer to two decimal places, if necessary

If you need to take out a $50,000 student loan 2 years before graduating, which loan option will result in the lowest overal cost to you: a subsidized loan with 6.8% interest for 10 years, a federal unsubsidized loan with 5.6% interest for 10 years, or a private loan with 5.0% interest and a term of 13 years? How much would you save ever the other options? All payments are deferred for 6 months after graduation and the interest is capitalized. (a) Find the total cost of the subsidized loan. The total cost of the subsidized loan is S Round your answer to two decimal places, if necessary

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

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If you need to take out a $70,000 student loan 2 years before graduating, which loan option will result in the lowest overall cost to you: a subsidized loan with 6.9% interest for 10 years, a federal unsubsidized loan with 5.9% interest for 10 years, or a private loan with 7.0% interest and a term of 16 years? How much would you save over the other options? All payments are deferred for 6 months after graduation and the interest is capitalized. Part: 0 / 5 0 of 5 Parts Complete Part 1 of 5 (a) Find the total cost of the subsidized loan. The total cost of the subsidized loan is $ . Round your answer to two decimal places, if necessary. (b) Find the total cost of the unsidized loan. (c) find the total cost of the private loan. (d) Which loan ha the overall lowest loan,and how much would you save over the other options?
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To pay for university, you have just taken out a $1000 government loan that makes you pay $126 per year for 25 years. Calculate the yield to maturity if you start making payments exactly one year from now. If you start making these payments after your graduation, i.e. exactly three years from now, is If the interest rate was 12%, then the present discounted values on the payment on the government loan will be less than $1,000 amount of loan because they do not start for two years. That is the reason why the Interest rate must be less than 12% in order to the present discounted value adds up to $1,000 loan amount
Suppose that your parents are willing to lend you $20,000 for part of the cost of your college education and living expenses. They want you to repay them the $20,000, without any interest, in a lump sum 15 years after you graduate, when they plan to retire and move. Meanwhile, you will be busy repaying federally guaranteed loans for the first 10 years after graduation. But you realize that you won’t be able to repay the lump sum without saving up. So you decide that you will put aside money in an interest-bearing account every month for the five years before the payment is due. You feel comfortable with putting aside $275 a month (the amount of the payment on your college loans, which will be paid off after 10 years). How high an annual nominal interest rate on savings do you need to accumulate the $20,000 in 60 months, if interest is compounded monthly? Enter into a spreadsheet the values d 5 275, r 5 0.05 (annual rate), and n 5 60, and the savings formula with r replaced by r/12 (the…
Suppose that you need $30,000 for your last year of college. You could go to a private lending institution and apply for a signature student loan; rates range from 7% to 14%. However, your Aunt Sally is willing to loan you the money from her retirement savings, with no repayment until after graduation. All she asks is that in the meantime you pay her each month the amount of interest that she would otherwise get on her savings (since she needs that to live on), which is 4%.What is your monthly payment to her, and how much interest will you pay her over the year (9 months)?(Fill in the blanks below and give your answers as whole numbers.)The amount of interest per month you would pay Aunt Sally is $__(1)__ .The total interest you will pay her over the year (9 months)is $__(2)__ .
“Suppose that your parents are willing to lend you $20,000 for part of the cost of your college education and living expenses. They want you to repay them the $20,000 without any interest, in a lump sum 15 years after you graduate, when they plan to retire and move. Meanwhile, you will be busy repaying federally guaranteed loans for the first 10 years after graduation. But you realize that you won’t be able to repay the lump sum without saving up. So you decide that you will put aside money in an interest-bearing account every month for the first five years before the payment is due. You feel comfortable with setting aside $275 a month (the amount of the payment on your college loans, which will be paid off after 10 years). How high an annual nominal rate on savings do you need to accumulate the $20,000, in 60 months, if interest is compounded monthly? Enter into a spreadsheet the values of d = 275, r = 0.05 (annual rate), and n = 60, and the savings formula with r replaced…
You've run out of money for college, and your college roommate has an idea for you. He offers to lend you $ 15,000, for which you will repay him $42, 798 at the end of 8 years. If you took this loan, what interest rate would you be paying on it?
Mr. and Mrs. MBA are planning to purchase a $200,000 house and have $40,000 as a down payment towards their purchase. The MBAs are considering two 30-year home mortgage loan options. The first option is 6.25% APR financing with no points. The second option is 5.9% APR financing that requires 1.5% (or 1.5 points) of the loan amount be paid up front in order to secure this lower finance rate for the entire needed loan amount (That is, you can think of 1.5 points is an additional fee to enjoy lower interest rate and this up-front fee should not be included in the loan amount.) Answer the following: A. What is the MBAs monthly payment for each loan? B. Ignoring the time value of money, how many months would the MBAs have to stay in their house to break even on the points they would pay on the second loan option vs. the no-point first loan option?