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 help 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 help 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

By using the trip as collateral for the loan, Elijah can potentially get a lower interest rate and more favorable terms compared to an unsecured loan. This will help him save money in the long run and make it easier for his parents to pay back the loan next year.