USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 110

Multiple Choice

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 10-year, 7 percent coupon bond priced to yield 8 percent. As a swap candidate, you are considering a 10-year, 8 percent coupon bond priced to yield 9 percent. Assume a reinvestment at 9 percent, semiannual compounding, and a one-year workout period.

-Refer to Exhibit 13.4. The realized compound yield on the candidate bond is

• A) 7.0%.
• B) 11.0%.
• C) 10.0%.
• D) 9.0%.
• E) 12.0%.

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