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A bank has two 3-year commercial loans with a present value of $70 million. The first is a $30 million loan that requires a single

  • A bank has two 3-year commercial loans with a present value of $70 million. The first is a $30 million loan that requires a single payment of $37.27 million in three years, with no other payments till then. The second loan is for $40 million. It requires an annual interest payment of $3 million. The principal of $40 million is due in three years. If the general level of interest rate is 7.5%, what is the duration of the bank’s commercial loan portfolio?

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