Exhibit 19 -Refer to Exhibit 19

question 47

Multiple Choice

Exhibit 19.2
Use the Information Below for the Following Problem(S)
The following information is given concerning a substitution swap. You currently hold a 15 year, 7 percent coupon bond priced to yield 8 percent. As a swap candidate you are considering a 15 year, 7 percent coupon bond priced to yield 8.5 percent. Assume a reinvestment rate of 8.5 percent, semiannual compounding, and a one-year workout period.
$$\begin{array} { l c c } & \text { Current Bond } & \text { Candidate Bond } \\\hline \text { Dollar Investment } & \$ 913.54 & ? \\\text { Caupan } & 70.00 & 70.00 \\\text { i an One Coupon } & 1.487 & 1.487 \\\text { Principal Value at Year End } & 916.68 & 878.55 \\\text { Total Accrued } & 988.17 & 950.04 \\\text { Total Gain } & 74.63 & ? \\\text { Gain per Invested Dollar } & ? & ? \\\text { Realized Compound Yield } & ? & ?\end{array}$$
-Refer to Exhibit 19.2.The realized compound yield on the current bond is

• A) 15.50%
• B) 11.03%
• C) 10.30%
• D) 8.01%
• E) 9.00%

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