Elijah has an opportunity to study abroad, but this will cost $5000 more than his regular college tuition. He wants to have a career in international finance when he graduates, so this opportunity will be particularly valuable for his career. His parents encourage him to go and tell him that they will pay back the loan next year when they are done paying his brother's college tuition. What kind of loan should Elijah get?

Question

Elijah has an opportunity to study abroad, but this will cost $5000 more than his regular college tuition. He wants to have a career in international finance when he graduates, so this opportunity will be particularly valuable for his career. His parents encourage him to go and tell him that they will pay back the loan next year when they are done paying his brother's college tuition. What kind of loan should Elijah get?

A. a loan with a very high APR
B. a government bond or treasury bill
C. a secured loan since the trip is collateral
D. an unsecured loan since there is no collateral

Answer 1

C. a secured loan since the trip is collateral

Since Elijah's parents have promised to pay back the loan next year, a secured loan using the study abroad trip as collateral would be the best option. This ensures that Elijah has the opportunity to study abroad and pursue his career goals, while also providing assurance to the lender that the loan will be repaid.