USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 44

Multiple Choice

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 8 percent coupon bond priced to yield 10 percent. As a swap candidate you are considering a 25-year, Aa 8 percent coupon bond priced to yield 10.50 percent. Assume a reinvestment rate of 10 percent, semiannual compounding, and a one-year workout period.

-Refer to Exhibit 13.7. The dollar investment in the candidate bond is

• A) $780.34.
• B) $1483.25.
• C) $1361.54.
• D) $1413.95.
• E) $1000.00.

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