To pay for university, you have just taken out a $1000 government loan that makes you pay
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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. However, you don t have to start making these payments until you graduate from university two years from now. Why is the yield to maturity necessarily less than 12%, the yield to maturity on a normal $1000 fixed-payment loan in which you pay $126 per year for 25 years?
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The yield to maturity YTM for a bond or loan is the annual rate of return an investor or borrower ca...View the full answer
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Related Book For 
The Economics Of Money Banking And Financial Markets
ISBN: 9780321584717
4th Canadian Edition
Authors: Frederic S. Mishkin, Apostolos Serletis
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