Question

Which would have a longer duration: (a) a five-year fully amortized installment loan with semiannual payments...

Which would have a longer duration: (a) a five-year fully amortized installment loan with semiannual payments or (b) a five-year semiannual payment bond, ceteris paribus. Why?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

Duration: It is the time period for which the bond is alive.

It gives an estimate of the life of the bond i.e effective average maturity of the bond.

In simple terms, it's the time period to recover the price of the bond.

When compared to Semi-Annual Bond, A Fully Amortized loan with periodically repay the principal amount.

Hence it will have a lower duration.

Conclusion:

Semi-Annual Bond: Higher duration.

Fully Amortized loan, lower duration.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Fully amortized loan​ (annual payments for principal and interest with the same amount each​ year). Chuck...
Fully amortized loan​ (annual payments for principal and interest with the same amount each​ year). Chuck Ponzi has talked an elderly woman into loaning him ​$35 comma 000 for a new business venture. She​ has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the ​$35 comma 000 with an annual interest rate of 11​% over the next 5 years. Determine the cash flow to the woman under a fully amortized​ loan,...
A bank offers you a $72,000, 4-year term loan (to be fully amortized over 4 years)...
A bank offers you a $72,000, 4-year term loan (to be fully amortized over 4 years) at an annual interest rate of 7%. What will your annual loan payment be? Group of answer choices $20,720 $23,014 $21,256 $19,704 Which one of the following terms is used to describe a loan whereby the borrower pays only a lump sum at maturity; no other payments are made by the borrower: Group of answer choices fully amortized loan interest-only loan modified loan pure...
Find the amortization table for a $8,000 loan amortized over 3 years with semiannual payments if...
Find the amortization table for a $8,000 loan amortized over 3 years with semiannual payments if the interest rate is 8.3% per year compounded semiannually. (Round your answers to the nearest cent.) End of Period Payment Made Payment Toward Interest Payment Toward Principal Outstanding Principle 0 8000 1 2 3 4 5 6
Find the amortization table for a $23,000 loan amortized over 3 years with semiannual payments if...
Find the amortization table for a $23,000 loan amortized over 3 years with semiannual payments if the interest rate is 6.1% per year compounded semiannually. (Round your answers to the nearest cent.) End of Period Payment Made Payment Toward Interest Payment Toward Principal Outstanding Principle 0 23000 1 2 3 4 5 6
1) Your company is planning to borrow $1,000,000 on a 3-year, 8%, fully amortized, term loan....
1) Your company is planning to borrow $1,000,000 on a 3-year, 8%, fully amortized, term loan. Payments for this loan are made at the end of each year, in equal installments. a. What is the amount of each annual payment? b. What will be the amount of the principal paid in the second yearly installment? c. What will be the amount of interest paid in the third yearly installment? 2) A stock is not expected to pay a dividend over...
A company with a fiscal year ending on December 31 borrowed money with an installment loan...
A company with a fiscal year ending on December 31 borrowed money with an installment loan of $500,000 on January 1, 2017. The loan agreement requires the company to make five equal annual payments that will fully amortize the loan in exactly five years. The first payment on the loan was made December 31, 2017 and the annual interest rate associated with the loan was 8 percent. After the December 31, 2019 payment is made, the amount of the liability...
you are borrowing 200,000 for an amortized loan with terms that include annual payments, 5 year...
you are borrowing 200,000 for an amortized loan with terms that include annual payments, 5 year loan, and interest rate of 7.5 per year. How much of the first year's payment would be applied toward reducing the principal
Find the amortization table for a $23,000 loan amortized in five annual payments if the interest...
Find the amortization table for a $23,000 loan amortized in five annual payments if the interest rate is 8.5% per year compounded annually. (Round your answers to the nearest cent.)
A farmer needs to borrow $2,333.92. The local PCA will make a 2-year loan fully amortized...
A farmer needs to borrow $2,333.92. The local PCA will make a 2-year loan fully amortized at 12% with quarterly payments. A $10 dollar loan fee and stock purchase is required. There is a 4% stock requirement. (i) What is the actuarial rate?             (ii) What is the APR?             (iii) What is the effective rate?
5. You have a $ 6,000 loan to be repaid in 5 years (annual payments) at...
5. You have a $ 6,000 loan to be repaid in 5 years (annual payments) at a 7% interest rate. Create an amortization schedule for a fully amortized loan with constant-payment installments.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT