Final answer:
Pure discount loans, interest-only loans, and amortized loans differ in payment structure, with amortized loans combining principal and interest in each payment. Grants do not require repayment unlike loans, and subsidized loans offer the benefit of the government paying interest during certain periods. Bonds differ from bank loans in terms of market trade ability and repayment structure.
Step-by-step explanation:
Differences Between Loan Types
Pure discount loans are loan agreements where the borrower receives an amount upfront and repays the entire principal and interest at the end of the loan term in a single lump sum. Interest-only loans require the borrower to pay only the interest on the principal balance, with the full principal amount due at the end of the loan term. Amortized loans involve scheduled periodic payments that contain both interest and principal, steadily reducing the balance owed over the life of the loan.
Grants vs. Loans and Subsidized vs. Unsubsidized Loans
Grants are financial aid that doesn't need to be repaid, whereas loans are borrowed money that must be repaid with interest. Subsidized loans have the interest paid by the government while the student is in school or during the grace period, and unsubsidized loans accrue interest from the time the loan is disbursed.
Comparison of Bonds and Bank Loans
From a firm's perspective, a bond is similar to a bank loan in that both are methods for raising capital. However, bonds are securities sold to investors and can be traded on secondary markets, while bank loans are typically held by the lending institution and not traded.
Equity Calculation Example
For Eva who bought a house for $200,000 with a 10% down payment, her equity would be the amount of her down payment, which in her case is $20,000.
Fixed-Rate Mortgage vs. Adjustable-Rate Mortgage
A fixed-rate mortgage maintains the same interest throughout the loan term, whereas an adjustable-rate mortgage fluctuates with market rates. If inflation drops by 3%, a homeowner with an adjustable-rate mortgage will likely experience a decrease in their interest rate, leading to lower monthly payments.