USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 94

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 10-percent coupon bond priced to yield 12 percent. As a swap candidate, you are considering a 25-year, Aa 10 percent coupon bond priced to yield 13 percent. Assume a reinvestment rate of 12 percent, semiannual compounding, and a one-year workout period.

-Refer to Exhibit 13.9. The value of the swap is ____ basis points in one year.

• A) 94.14
• B) 0.9414
• C) 9.414
• D) 941.4
• E) 0.09414

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Definitions:

Lithium

A chemical element used especially in the form of its salts as a mood-stabilizing medication, primarily in the treatment of bipolar disorder.

Prozac

A brand name for fluoxetine, a selective serotonin reuptake inhibitor (SSRI) used to treat depression and a variety of other mental health conditions.

Celexa

A prescription medication belonging to the class of drugs known as selective serotonin reuptake inhibitors (SSRIs), used to treat depression.

Clomipramine

A tricyclic antidepressant medication primarily used to treat obsessive-compulsive disorder.