Exhibit 16-1
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 24

Multiple Choice

Exhibit 16-1
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
The following information is given concerning a pure yield pick-up swap: You currently hold a 10 year, 7% coupon bond priced to yield 8%. As a swap candidate you are considering a 10 year, 8% coupon bond priced to yield 9%. Assume a reinvestment at 9%, semiannual compounding, and a one-year workout period. $\begin{array}{lcc}&\text { Current Band } & \text { Candidate Band } \\\hline \text { Dollar Investment } & \$ 932.05 & \$ 934.96 \\\text { Coupon } & \$ 70.00 & \$ 80.00 \\\text { on One Coupon } & \$ 1.575 & ? \\\text { Principal Value at Year End } & \$ 936.70 & ? \\\text { Total Accrued } & \$ 1008.28 & ? \\\text { Realized Compound Yield } & 8.018 \% & ?\end{array}$
-Refer to Exhibit 16-1. The interest on one coupon for the candidate bond is

• A) $2.97
• B) $2.03
• C) $1.80
• D) $1.37
• E) $3.49

Recognize conditions under which a law, even if desired by the majority, might be economically inefficient.

Identify and explain voter failure and its impacts on policy outcomes.

Describe examples of voter failure and understand their consequences for societal welfare.

Understand the concept of logrolling and its potential effects on economic efficiency.