To help pay for college, you have just taken out a$1,000 government loan that makes you pay $126per year for 25 years. However, you don’t have to startmaking these payments until you graduate from collegetwo years from now. Why is the yield to maturitynecessarily less than 12%? (This is the yield to maturityon a normal $1,000 fixed-payment loan on which youpay $126 per year for 25 years.)

To help pay for college, you have just taken out a$1,000 government loan that makes you pay $126per year for 25 years. However, you don’t have to startmaking these payments until you graduate from collegetwo years from now. Why is the yield to maturitynecessarily less than 12%? (This is the yield to maturityon a normal $1,000 fixed-payment loan on which youpay $126 per year for 25 years.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 14P

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