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 Economics Of Money Banking And Financial Markets

ISBN: 9780321584717

4th Canadian Edition

Authors: Frederic S. Mishkin, Apostolos Serletis

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