Cement Corporation has taken a one-year loan with a face value of $500,000 and a coupon rate of 18%. The loan requires payment of accrued interest and 40% of the principal at the end of six months. The remaining vield is 12%, what is the duration of the loan in years?
Cement Corporation has taken a one-year loan with a face value of $500,000 and a coupon rate of 18%. The loan requires payment of accrued interest and 40% of the principal at the end of six months. The remaining vield is 12%, what is the duration of the loan in years?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Cement Corporation has taken a one-year loan with a face value of $500,000 and a coupon rate of 18%.
The loan requires payment of accrued interest and 40% of the principal at the end of six months. The remaining principal and accrued interest are due at the end of the year. If the required
yield is 12%, what is the duration of the loan in years?
(Please round your answer to three decimal places.)
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