Exhibit 19 -Refer to Exhibit 19

question 71

Multiple Choice

Exhibit 19.5
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 2 percent coupon bond priced to yield 9.5 percent. As a swap candidate you are considering a 20 year, Aa 14 percent coupon bond priced to yield 10.00. Assume a reinvestment rate of 11 percent, semiannual compounding, and a one-year workout period.
$$\begin{array} { l c c } & \text { Wurrent Bond } & \text { Candidente Eand } \\\hline \text { Dollar Investrent } & \$ 1222 . [ 4 & 1343.18 \\\text { Caupan } & 110.00 & 140.00 \\\text { i an One Coupan } & 3.3 & ? \\\text { Principal Value at Year End } & 1218.04 & ? \\\text { Total Accrued } & 1341.34 & ? \\\text { Realized Campund Yield } 9.5351 \% & ? &\end{array}$$
-Refer to Exhibit 19.5.The value of the swap is ____ basis points in one year.

• A) 0.004921
• B) 0.4921
• C) 4.921
• D) 49.21
• E) 492.1

Understand the relationship between price changes and demand elasticity.

Grasp how production levels correlate with current and desired margins.

Recognize the characteristics of perfectly elastic and inelastic demand curves.

Determine the effects of income changes on the demand for normal and inferior goods.

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