Bridget Morrow is a sophomore at State College and is running out of money. Wanting to continue her education, Bridget is considering a student loan. List her options. How can she best minimize her borrowing costs and maximize her flexibility?

Problem 2.

(a) Find the finance charges on a 6.5%, 18 month, single payment loan when interest is computed using the simple interest method. Determine the APR. The amount of the loan is $1000. Please show your work.

(b) Find the finance charges on the same loan as above when interest is computed using the discount method. Determine the APR in each case. The amount of the loan is $1000. Please show her work.

(c) Which of the two methods above do you prefer and why?

(d) Do you think you would be offered the options?