A 20-year $250,000 mortgage is taken out in the USA at an interest rate of j₁₂ = 6% (US mortgage rates can be compounded monthly). The interest rate is locked in for 7-years and the monthly mortgage payment is $1791.08. The outstanding balance of the mortgage at the end of 7-years is $193,687.68. What is the Macaulay duration, D, of this mortgage, in years?

• A.

  5.00 D < 5.25

• B.

  4.75 D < 5.00

• C.

  D < 4.75

• D.

  5.25 < D