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

question 48

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 realized compound yield on the candidate bond is

• A) 7.0%
• B) 11.0%
• C) 10.0%
• D) 9.0%
• E) 12.0%

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Definitions:

Urine

A liquid by-product of metabolism in humans and many animals, eliminated from the body by the kidneys through the process of urination.

Bladder

A hollow organ in the pelvic area that stores urine before it is expelled from the body.

Elastic Fibers

Fiber components of connective tissue that provide elasticity and resilience to various body parts.

Connective Tissue

Type of animal tissue that binds structures together, provides support and protection, fills spaces, stores fat, and forms blood cells; adipose tissue, cartilage, bone, and blood are types of connective tissue; living cells in a non-living matrix.