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

question 3

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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.  Current Band  Candidate Band  Dollar Investment $932.05$934.96 Coupon $70.00$80.00 on One Coupon $1.575? Principal Value at Year End $936.70? Total Accrued $1008.28? Realized Compound Yield 8.018%?\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.


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