CHAPTER 17 LECTURE - MIT OpenCourseWare

• Big “balloon” payment due at end (maximizes refinancing stress). • Maximizes total interest payments (but this is not really a cost or disadvantage from an NPV or OCC perspective). • Has slightly higher “duration” than amortizing loan of same maturity (Îgreater interest rate risk for lender, possibly slightly higher interest rate when yield curve has normal positive slope ... ................
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