Assume that you qualify for a $25,000 loan from the Canada Student Loans Program to help finance

Question:

Assume that you qualify for a $25,000 loan from the Canada Student Loans Program to help finance your education. You are considering whether to repay this loan on graduation with a fixed interest rate of prime +5% or a floating interest rate of prime +2.5%. Assuming you start repaying your loan immediately upon graduation, information related to your loan options follows:

(a) Identify the advantages and disadvantages of each interest rate option.
(b) Explain which option you think is best for you and why.

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Related Book For answer-question

Financial Accounting Tools for Business Decision Making

ISBN: 978-1118644942

6th Canadian edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine

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Question Posted: Jan 11, 2017 10:23 AM

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Assume that you qualify for a $25,000 loan from the Canada Student Loans Program to help finance

Question:

Fixed Interest Rate Floating Interest Rate Amount of loan Prime Interest rate assumed Number of months to repay loan Monthly Instalment payment Total interest payable over life of loan $25,000 2.75% 120 months $300 $11,003 $25,000 2.75% 120 months $268 $7,188

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a The advantage of the fixed interest rate option is that the rate will not change during the 10 yea...View the full answer

Financial Accounting Tools for Business Decision Making

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