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....

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?