Exhibit 19 -Refer to Exhibit 19

question 8

Multiple Choice

Exhibit 19.6
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 10 percent coupon bond priced to yield 12 percent. As a swap candidate you are considering a 25 year, Aa 10 percent coupon bond priced to yield 13 percent. Assume a reinvestment rate of 12 percent, semiannual compounding, and a one-year workout period.
$$\begin{array} { l c c } & \text { Current Bond } & \text { Candidate Bond } \\\hline \text { Dollar Investment } & \$ 842.38 & ? \\\text { Caupan } & 100.00 & 100.00 \\\text { i an One Coupon } & 3.0 & 2.75 \\\text { Principal Value at Year End } & 843.50 & 780.46 \\\text { Total Accrued } & 946.50 & 883.21 \\\text { Total Gain } & 104.12 & ? \\\text { Gain per Invested Dollar } & ? & ? \\\text { Realized Compound Yield } & ? & ?\end{array}$$
-Refer to Exhibit 19.6.The realized compound yield on the current bond is

• A) 10.00%
• B) 11.9985%
• C) 12.9397%
• D) 13.9399%
• E) 12.3585%