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Problem 3. HELOC You are preparing to buy a car that costs$36,000 $36,000. You can pay for the car using an auto loan from the
Problem 3. HELOC
You are preparing to buy a car that costs\$36,000
$36,000.
You can pay for the car using an auto loan from the car manufacturer or using money from your home equity line of credit (HELOC). The auto loan charges2.75\%
2.75%interest per annum. The HELOC charges3.85\%
3.85%interest per annum but the interest is tax deductible. If your current tax rate is32\%
32%, which source of funds should you use?
Auto Loan
HELOC
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