Question
Jane Doe takes out a $100,000 15-year loan from Acme Corporation at an annual effective rate of 6%. She can either repay her loan via
Jane Doe takes out a $100,000 15-year loan from Acme Corporation at an annual effective rate of 6%. She can either repay her loan via the amortization method with level annual payments, or via the sinking fund method with level payments of interest, and level deposits into a sinking fund that earns an annual effective rate of 6%. -Jane Doe's perspective : What is Jane's Macaulay duration and the convexity under both repayment schemes ? -Acme Corporation's perspective : What is the Macaulay duration and the convexity under both repayment schemes ?
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