Carlyle Needs to Borrow Some Money for Some Unexpected Bills

question 67

Essay

Carlyle needs to borrow some money for some unexpected bills.He can get a home equity loan at 8 percent interest for which the interest is deductible.Alternatively,he can borrow on his life insurance at 5 percent,but the interest is not deductible.Which is his best alternative if his marginal tax rate is 35 percent?

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