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

D. • an unsecured loan since there is no collateral

In this situation, Elijah should get an unsecured loan since there is no collateral to secure the loan against. Given that his parents have offered to help pay back the loan next year, an unsecured loan would be appropriate as it does not require any assets as collateral. This type of loan would allow Elijah to take advantage of the opportunity to study abroad and pursue his career goals in international finance.