USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 6

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 20-year, Aa 8 percent coupon bond priced to yield 10 percent. As a swap candidate you are considering a 20-year, Aa 10 percent coupon bond priced to yield 10.75 percent. Assume a reinvestment rate of 12.00 percent, semiannual compounding, and a one-year workout period.

-Refer to Exhibit 13.6. The interest on one coupon for the candidate bond is

• A) $2.40.
• B) $2.75.
• C) $9.60.
• D) $11.00.
• E) $50.00.