USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 45

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 2 percent coupon bond priced to yield 9.5 percent. As a swap candidate, you are considering a 20-year, Aa 14 percent coupon bond priced to yield 10.00. Assume a reinvestment rate of 11 percent, semiannual compounding, and a one-year workout period.

-Refer to Exhibit 13.8. The value of the swap is ____ basis points in one year.

• A) 0.004921
• B) 0.4921
• C) 4.921
• D) 49.21
• E) 492.1

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Definitions:

Day Of Infamy

The "Day of Infamy" refers to December 7, 1941, when Japan launched a surprise attack on Pearl Harbor, leading to the United States' entry into World War II.

Pearl Harbor

The site of a surprise military attack by the Japanese Navy against the United States naval base at Pearl Harbor, Hawaii, on December 7, 1941, leading to the U.S. entering World War II.

President Roosevelt

A reference either to Franklin D. Roosevelt, the 32nd President of the United States who served during the Great Depression and World War II, or Theodore Roosevelt, the 26th President known for his progressive policies.

United States

A country in North America composed of 50 states, a federal district, five major self-governing territories, and various possessions.