A one-year, $100,000 loan carries a coupon rate and a market interest rate of 12 percent. The

Question:

A one-year, $100,000 loan carries a rate and a market interest rate of 12 percent. The loan requires payment of accrued interest and one-half of the principal at the end of six months. The remaining principal and accrued interest are due at the end of the year.
a. What will be the cash flows at the end of six months and at the end of the year?
b. What is the present value of each cash flow discounted at the market rate? What is the total present value?
c. What proportion of the total present value of cash flows occurs at the end of six months? What proportion occurs at the end of the year?
d. What is the duration of this loan? Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...