USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 21

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is given concerning a substitution swap. You currently hold a 15-year, 7 percent coupon bond priced to yield 8 percent. As a swap candidate you are considering a 15-year, 7 percent coupon bond priced to yield 8.5 percent. Assume a reinvestment rate of 8.5 percent, semiannual compounding, and a one-year workout period.

-Refer to Exhibit 13.5. The value of the swap is ____ basis points in one year.

• A) 18.4
• B) 23.3
• C) 49.1
• D) 46.5
• E) 46.8

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Definitions:

Eardrum

A thin, cone-shaped membrane that separates the external ear from the middle ear, and vibrates in response to sound waves.

Taste Preferences

Individual differences in liking or disliking certain flavors and foods.

Innate

Inborn or natural characteristics, qualities, or abilities not acquired through learning or experience.

Genetic Evidence

Information obtained from DNA analysis that supports or refutes genetic relationships, inheritance patterns, or the presence of specific genes.