To pay for university, you have just taken out a $1000 government loan that makes you pay $126 per year for 25 years. Calculate the yield to maturity if you start making payments exactly one year from now. If you start making these payments after your graduation, i.e. exactly three years from now, is If the interest rate was 12%, then the present discounted values on the payment on the government loan will be less than $1,000 amount of loan because they do not start for two years. That is the reason why the Interest rate must be less than 12% in order to the present discounted value adds up to $1,000 loan amount
To pay for university, you have just taken out a $1000 government loan that makes you pay $126 per year for 25 years. Calculate the yield to maturity if you start making payments exactly one year from now. If you start making these payments after your graduation, i.e. exactly three years from now, is If the interest rate was 12%, then the present discounted values on the payment on the government loan will be less than $1,000 amount of loan because they do not start for two years. That is the reason why the Interest rate must be less than 12% in order to the present discounted value adds up to $1,000 loan amount
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 16P
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To pay for university, you have just taken out a $1000 government loan that makes you pay $126
per year for 25 years.
- Calculate the yield to maturity if you start making payments exactly one year from now.
- If you start making these payments after your graduation, i.e. exactly three years from now, is
If the interest rate was 12%, then the present discounted values on the payment on the government loan will be less than $1,000 amount of loan because they do not start for two years. That is the reason why the Interest rate must be less than 12% in order to the
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