Business and engineering seniors are comparing methods of financing their college education during their senior year. The business student has $30,000 in student loans that comes due at graduation. Interest is an effective 4% per year. The engineering senior owes $50,000: 50% from his parents with no interest due, and 50% from a credit union loan. This latter amount is also due at graduation with an effective rate of 7% per year. (a) What is the D-E mix for each student? (b) If their grandparents pay the loans in full at graduation, what are the amounts on the checks they write for each graduate? (c) When grandparents pay the full amount at graduation, what percent of the principal does the interest represent?
Business and engineering seniors are comparing
methods of financing their college education
during their senior year. The business student has
$30,000 in student loans that comes due at graduation.
Interest is an effective 4% per year. The
engineering senior owes $50,000: 50% from his
parents with no interest due, and 50% from a credit
union loan. This latter amount is also due at graduation
with an effective rate of 7% per year.
(a) What is the D-E mix for each student?
(b) If their grandparents pay the loans in full at
graduation, what are the amounts on the
checks they write for each graduate?
(c) When grandparents pay the full amount at
graduation, what percent of the principal
does the interest represent?
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