Exhibit 19 -Refer to Exhibit 19

question 34

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 value of the swap is ____ basis points in one year.

• A) 18.4
• B) 23.3
• C) 49.1
• D) 46.5
• E) 46.8

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Definitions:

Public Good

Refers to commodities or services that provide benefits to all members of society and whose use by one individual does not diminish the availability to others.

Public Good

Goods that once provided to one consumer, can be accessed by others without additional costs, benefiting the entire community.

Free-rider Problem

A situation where individuals consume a good without paying for it, benefiting from the good or service without contributing to its cost.

Public Good

A good that is non-excludable and non-rivalrous, meaning that its use by one person does not reduce its availability to others and no one can be effectively excluded from using it.