Exhibit 19 -Refer to Exhibit 19

question 7

Multiple Choice

Exhibit 19.4
Use the Information Below for the Following Problem(S)
The following information is given concerning a substitution swap. You currently hold a 25 year, Aa 8 percent coupon bond priced to yield 10 percent. As a swap candidate you are considering a 25 year, Aa 8 percent coupon bond priced to yield 10.50 percent. Assume a reinvestment rate of 10 percent, semiannual compounding, and a one-year workout period.
$$\begin{array} { l c c } & \text { Current Bond } & \text { Candidate Bond } \\\hline \text { Dollar Investment } & \$ 817.44 & ? \\\text { Caupan } & 80.00 & 80.00 \\\text { i an One Coupon } & 2.00 & 2.20 \\\text { Principal Value at Year End } & 819.23 & 782.33 \\\text { Total Accrued } & 901.23 & 864.53 \\\text { Total Gain } & 83.79 & ? \\\text { Gain per Invested Dollar } & ? & ? \\\text { Realized Compound Yield } & ? & ?\end{array}$$
-Refer to Exhibit 19.4.The realized compound yield on the current bond is

• A) 6.00%
• B) 7.00%
• C) 8.00%
• D) 10.00%
• E) 12.00%

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Definitions:

Trend

The pattern or trajectory of changes and developments observed over time in data or events.

Seasonality

The characteristic of a time series in which the data experiences regular and predictable changes that recur every calendar year.

Exponential Smoothing

A method used in forecasting time series data, focusing on univariate statistics by applying weights that exponentially lower for past data points.

Forecasting

The process of making predictions about the future based on past and present data and analysis of trends.