USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 33

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 value of the swap is ____ basis points in one year.

• A) 32.3
• B) 48.7
• C) 75.8
• D) 98.2
• E) 104.3

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Definitions:

Sure Thing

A situation or outcome that is guaranteed or considered to be a certainty.

Risky Gamble

The act of taking dangerous chances in the hope of achieving a desired result, often with the potential for significant loss.

Hypoactive Bowel Sounds

Reduced or below-normal sounds of bowel activity, indicative of decreased gastrointestinal movement or blockage.

Peritonitis

Inflammation of the peritoneum, the thin tissue that lines the inner wall of the abdomen and covers most of the abdominal organs; often caused by infection or leakage of intestinal contents.