Question
You have a mortgage with a fixed interest rate of 2.7%. Current interest rates on municipal bonds (low-risk investments) are now 9.3%. Your great-aunt recently
You have a mortgage with a fixed interest rate of 2.7%. Current interest rates on municipal bonds (low-risk investments) are now 9.3%. Your great-aunt recently died and left you $2,000. Should you use the money to pay off your mortgage early or should you invest the money in municipal bonds?
A. Invest in the municipal bonds because we should support our country by buying municipal bonds. | ||
B. Invest in the municipal bonds, because the higher return on the bonds is enough to pay off the interest on the mortgage and still earn a return. | ||
C. Pay off the mortgage early because it is never good to have debts and investments at the same time. | ||
D. Pay off your mortgage early, because it is will continue to accrue interest regardless of what you invest in. | ||
E. Invest in the municipal bonds so that you still have an investment earning a return even if you miss your mortgage payments and have to forfeit your house. | ||
F. Pay off the mortgage early because you will earn a higher total return in the long-run if you invest in bonds after you have paid off your debt. |
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