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You are enrolling in an MBA program. To pay your tuition, you can either take out a standard student loan (so the interest payments are
You are enrolling in an MBA program. To pay your tuition, you can either take out a standard student loan (so the interest payments are not tax deductible) that has an EAR of 5.625% or you can use a tax-deductible home equity loan with an APR (monthly compounding) of 6%. You anticipate being in a very low tax bracket, so your tax rate will be only 15%. Which loan should you use? The after-tax rates for the two loans are: Compare Percent %. (Round to three decimal places.) Standard loan rate: Home equity loan rate: %. (Round to three decimal places.) The loan I should use is: (Select the best choice below.) A. The home equity loan. O B. Neither loan, because the rates are too high, O C. Either loan, because the rates are the same. OD The standard student loan. Click to select your answer(s)
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