Let's say you have a friend/relative/bank that's willing to loan you $20,000, the cost of this capital is 5.5%. This debt will be due two years from today. Bear in mind that you have no debt/mortgage/car payments, you have a few months of living expenses saved up and your current savings account is paying out 4.50% APY. What would M&I do?

A) Invest this cash into taxable mutual funds and look to pocket the difference

or

B) Don't do anything at all, cost of capital is too expensive

I'm also interested in suggestions outside of what's mentioned above.

 

B) Don't invest on margin.

 

be careful on putting anything into the stock market, as anything is able to drop, and if u are loaning u are already set back interest payments... might be worth it to put it into a high yield savings account and just hold it there... I personally would not take out a loan just for the hell of it, there needs to be a beneficial use that will outweigh the cost of holding that loan...

 

I would think high yield savings account would protect your money while still offering some money back. If you don't need all the money at once, what about a CD ladder?