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

question 3

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 value of the swap is ____ basis points in one year.

• A) 32.3
• B) 48.7
• C) 75.8
• D) 98.2
• E) 104.3

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Definitions:

Temporalis

A muscle located on the side of the skull, involved in chewing and moving the jaw.

Sternocleidomastoid

A major muscle in the neck that extends from the sternum and clavicle to the mastoid process of the temporal bone of the skull, involved in rotating and flexing the neck.

Latissimus Dorsi

A large, flat muscle on the back that stretches to the sides, behind the arm, and is involved in the movement of the shoulders and arms.

Insertion

Insertion refers to the placement of an object or substance into a body part or into a device, often used in medical procedures or mechanical processes.