Question: 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
Standard loan rate:	__%.(Round to three decimal places.)
Home equity loan rate	: __& (Round to three decimal places.)

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