USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is given concerning a pure yield pick-up swap: You currently hold a 20-year, Aa 8 percent coupon bond priced to yield 10 percent. As a swap candidate you are considering a 20-year, Aa 10 percent coupon bond priced to yield 10.75 percent. Assume a reinvestment rate of 12.00 percent, semiannual compounding, and a one-year workout period.

-Refer to Exhibit 13.6. The value of the swap is ____ basis points in one year.
A) 40.4
B) 60.6
C) 80.8
D) 20.5
E) 100.1

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is given concerning a pure yield pick-up swap: You currently hold a 20-year, Aa 8 percent coupon bond priced to yield 10 percent. As a swap candidate you are considering a 20-year, Aa 10 percent coupon bond priced to yield 10.75 percent. Assume a reinvestment rate of 12.00 percent, semiannual compounding, and a one-year workout period.
 
-Refer to Exhibit 13.6. The value of the swap is ____ basis points in one year.
A) 40.4 
B) 60.6 
C) 80.8 
D) 20.5 
E) 100.1

Quizplus · Accepted Answer

The Answer of USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is given concerning a pure yield pick-up swap: You currently hold a 20-year, Aa 8 percent coupon bond priced to yield 10 percent. As a swap candidate you are considering a 20-year, Aa 10 percent coupon bond priced to yield 10.75 percent. Assume a reinvestment rate of 12.00 percent, semiannual compounding, and a one-year workout period.
 
-Refer to Exhibit 13.6. The value of the swap is ____ basis points in one year.
A) 40.4 
B) 60.6 
C) 80.8 
D) 20.5 
E) 100.1