a. Calculate the semiannual payment on a $10,000 five year maturity, 8% yield fully amortizing loan. That is, the bank requires a 8% return (yield) and charges the customer 8% interest. (An amortizing security pays principle and interest throughout its life. The payment per period is constant.)
b. What is the duration of the lan in part a? Remember that duration uses cash flows, which you know from part a. The PV or price of a loan when booked is the amount loaned, here $100,000.