A bank grants a loan with the following characteristics:

➢ Duration: 5 years

➢ Nominal: 100 000

➢ Coupon: 12% base 30/360

➢ Constant monthly reimbursements m

Question 1: can you give us on excel (screenshot of spreadsheet with formula) or equivalent (manual computations) the value of m and for each months the amount of principal and interests paid, the amount of remaining principal? What is the initial duration and modified duration?

Question 2: each month 6% of the remaining principal (after standard reimbursement) is reimbursed by anticipation. Can you recalculate the elements of question 1?

Question 3: Actually, the yield curve is flat at 5%, can you calculate the initial value of the loan under assumptions of question 1 and 2? Can you explain the difference of price if any?

Answer rating: 100% (QA)

Answer 1 The firm must be registered in the state where they are situated after the organizational form has been chosen based on the business requirem... View the full answer