Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Question
Chapter 5, Problem 36P
Summary Introduction
To determine: The loan to be used by Person X.
Introduction:
A loan is the act of giving cash, property, or alternative product to different parties in exchange for future compensation of amount along with interest. A loan is evidenced by promissory note to pay back the principal amount along with interest charges.
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Students have asked these similar questions
If you need to take out a
$10,000
student loan
2
years before graduating, which loan option will result in the lowest overall cost to you: a subsidized loan with
6.7%
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
15
years? How much would you save over the other options? All payments are deferred for
6
months after graduation and the interest is capitalized.
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?
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.
A) Find the total cost of the subsidized loan?
B) Find the total cost of the unsubsidized loan?
C)Find the total cost of the private loan?
D) Which loan has the overall lowest cost, and how much would you save over the other options?
E) How much would the subsidized loan save you over the federal unsubsidized loan, and the savings on the private loan?
Chapter 5 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 5.1 - Prob. 1CCCh. 5.1 - Prob. 2CCCh. 5.2 - How can you compute the outstanding balance on a...Ch. 5.2 - What is an amortizing loan?Ch. 5.3 - What is the difference between a nominal and real...Ch. 5.3 - How do investors expectations of future short-term...Ch. 5.4 - Prob. 1CCCh. 5.4 - How do taxes affect the interest earned on an...Ch. 5.5 - What is the opportunity cost of capital?Ch. 5.5 - Why do different interest rates exist, even in a...
Ch. 5 - Your bank is offering you an account that will pay...Ch. 5 - Which do you prefer: a bank account that pays 5%...Ch. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - You are considering moving your money to a new...Ch. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - You can earn 50 in interest on a 1000 deposit for...Ch. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - You have just sold your house for 1,000,000 in...Ch. 5 - Prob. 16PCh. 5 - Your mortgage has 25 years left, and has an APR of...Ch. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - The mortgage on your house is five years old. It...Ch. 5 - You have credit card debt of 25,000 that has an...Ch. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Suppose the term structure of risk-free interest...Ch. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Suppose the current one-year interest rate is 6%....Ch. 5 - Figure 5.4 shows that Johnson and Johnsons...Ch. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Your best friend consults you for investment...Ch. 5 - Suppose you have outstanding debt with an 8%...Ch. 5 - In the summer of 2008, at Heathrow Airport in...Ch. 5 - Your firm is considering the purchase of a new...Ch. 5 - Prob. 41P
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