1.You can obtain a loan of $100 000 at a rate of 10 per cent for two years. You have a choice of (i) paying the interest (10 per cent) each year and the total principal at the end of the second year or (ii) amortising the loan, that is, paying interest (10 per cent) and principal in equal payments each year. The loan is priced at par.

What is the duration of the loan under both methods of payment?

Explain the difference in the two results. LO 6.1, 6.3, 6.4