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

Answer :

Answer: (B) a five-year semiannual payment bond

Explanation: The bond will have a longer duration because it is an investment that the investor receives interest payments until its maturity.

The amortizing loan is a loan whereby the borrower pays principle and interest throughout the period of the loan.

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