EBK THE ECONOMICS OF MONEY, BANKING AND
EBK THE ECONOMICS OF MONEY, BANKING AND
4th Edition
ISBN: 9780100668201
Author: Mishkin
Publisher: YUZU
Question
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Chapter 4, Problem 3Q
To determine

To help pay for college, you have just taken out a $1000 government loan that makes you pay $126 per year for 25 years. However, you don't have to start making these payments until you are graduate from college two years from now. Why is the yield to maturity necessarily less than 12%?

Concept Introduction:

Yield to Maturity - Total return anticipated if the asset is kept till its maturity.

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